The local currencies of 2 BRICS countries have crashed to a record low against the US dollar on Thursday in the Spot forex markets. The first to be heavily bruised is the Indonesian rupiah, which fell sharply to 17,315. On the other hand, the Indian rupee is once again back to its previous low of 94. The INR fell to 94.08 and is on track to breach its all-time low of 95.10, which it plummeted to in early April.
The steep decline comes even after the 2 BRICS members took concrete steps to protect their currencies. For instance, the Reserve Bank of India (RBI) curbed banks from betting against the rupee for not more than $100 million. In addition, it also forced banks to liquidate their US dollar holdings, which they complied with before April 10. The rupee rose from 95.10 to 92.80 due to the curbs, making RBI’s methods to safeguard the currency work.
However, this is not a permanent solution, as the market cannot be curbed for a long time. The weakness eventually shows up, and the higher oil prices are dampening the currencies of the BRICS countries. The US dollar, despite its flaws, is able to withstand the harsh whiplash of the markets. Local currencies quickly fold under pressure due to a lack of liquidity and trust. Sellers take a long time to liquidate these currencies, eventually stunting free cash flow for growth.
Also Read: China Buying Gold As BRICS Reserves Rise And Dollar Weakens
Currencies of BRICS & ASEAN Members Take a Beating Against the US Dollar
Coming under severe pressure to act, the Bank of Indonesia said that it would take “all necessary measures” to stabilize the rupiah. The central bank hinted at possible policy adjustments to support the currency and contain inflation risks. Apart from BRICS, ASEAN member the Philippines local currency peso weakened to 60.524 against the US dollar. Even the Thai baht slipped to 32.44, its weakest since early April.