Emerging currencies were hammered in Asia Wednesday as traders fled to safety on rising tensions over Syria, with the Indian rupee diving to a new low against the dollar.
Despite Finance Minister P. Chidambaram appealing for market calm there appeared to be no end in sight to the precipitous decline of the Indian unit as it clunked to a record low of 68.74 to the dollar Wednesday afternoon against 65.32 a day earlier.
The rupee has fallen more than 20 percent against the dollar since the start of May due to concerns that India will find it tough to close its wide current-account gap when developed countries end their easy-money policies.
Analysts say investors are also concerned about whether India can afford a proposed law to provide cheap grain to India's poor, which was passed by India's lower house of parliament late on Monday.
A strike in Syria could lead to a spurt in the price of oil -- the largest component of India's import bill -- and that would further worsen the country's trade imbalances.
"Overall sentiment is extremely negative for the country," Abhishek Goenka, head of India Forex Advisors, a currency trading firm in Mumbai, told Dow Jones Newswires.
The dollar bought 97.13 yen in Tokyo afternoon trade, marginally higher than 97.01 yen in New York Tuesday afternoon but sharply down from rates above 98.00 yen in Tokyo Tuesday.
The euro bought $1.3375 and 129.93 yen compared with $1.3391 and 129.88 yen.
Besides the rupee, other emerging Asian currencies fell.
The Indonesian rupiah dived to 11,418 to the dollar from 10,925 and the Philippine peso was down at 44.79 pesos from 44.43 pesos.
The dollar rose to 1,117.55 South Korean won from 1,115.85 won, to Sg$1.2842 from Sg$1.2824, and to 32.29 Thai baht from 32.16 baht. It edged up to Tw$29.99 from Tw29.97.
The Australian dollar fell to 89.11 US cents from 89.81 cents. The Chinese yuan dropped to 15.83 from 16.03 yen.
Global stocks plunged and oil prices shot up Tuesday as the West moved closer to punitive military action against Syria for its alleged attack on civilians using chemical weapons.
High-yielding assets, such as emerging market currencies, are being dumped and money is being parked in US dollars with US Treasuries.
The West, led by the United States, is edging closer to a targeted strike on Syria, which is accused of carrying out a gas attack on August 21 that killed hundreds of civilians.