Free-falling Indian rupee sinks to new lows

Mumbai: India's central bank promised on Friday to use "all its available tools" to stabilise the rupee, which sank to a record low against the dollar for a third straight day amid turmoil in global markets.

The Indian unit fell to 54.91 against the dollar, below its previous low of 54.58 a day earlier, before clawing back to 54.4 in late afternoon trade.

Asian shares and currencies fell after Moody's downgraded 16 Spanish banks on Thursday, while poor US manufacturing data heightened concerns over the global economy.

The central bank "will use all its available tools to fulfil its objective of curbing volatility in the foreign-exchange market", the bank's deputy governor Subir Gokarn told reporters in the eastern Indian city of Kolkata.

"The central bank will not hesitate to take more steps to stem the falls in rupee, if needed," he said.

But analysts and traders expect the rupee to fall further in coming days with risk aversion hitting global markets and sentiment souring over India due to its gaping trade and current account deficits and slowing economy.

"The rupee is in a freefall. Unless the RBI [Reserve Bank of India] and the government take major steps to boost sentiment, there are more worries ahead," said Abhishek Goenka, chief executive of India Forex, a consultancy firm.

Last week, the central bank announced new measures to support the local unit, ordering exporters and other foreign-exchange earners to convert half of their total foreign-exchange earnings kept in banks into rupees.