Published: Fri, October 05, 2018
Money | By Arnold Ball

Indian Rupee breaches 73 mark, plunges to fresh all-time low

Indian Rupee breaches 73 mark, plunges to fresh all-time low

On Wednesday the rupee slipped to a low of 73.42 per dollar as crude oil prices breached the 85 US dollars per barrel mark, leading to huge outflows of cash.

A rally in crude oil prices is expected to put more pressure on the rupee and it may send it near the 74-mark, said analyst Bhaskar Panda. In a clear indication that it is not yet done with rate increases, the central bank changed its stance to "calibrated tightening" from "neutral" that was in place since February 2017, Bloomberg reported. The currency pared some losses to touch a high of 72.90 per dollar on market speculation that RBI may open special dollar window for oil companies.

Oil prices stood around four year highs on Thursday.

SBI in its research report had said RBI should hike the repo rate by at least 25 basis points to control the value of rupee from falling.

The central bank retained the repo rate unchanged at 6.50 per cent, while the reverse repo rate also stayed at 6.25 per cent.

The rupee collapsed to a fresh low of 73.77 against the U.S. dollar Thursday, as global oil prices continued to rise, deepening concerns about the current account deficit and capital outflows.

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"Fuel and gas prices are on fire and markets are scurrying".

The benchmark Sensex fell 1.68% to 34577.99 points. The question was only of timing, said Radhika Rao, an economist at DBS in Singapore.

India's benchmark 10-year sovereign yield rose to 8.16%.

The IL&FS debt problems have pushed up short-term interest rates sharply with one-year commercial paper rising by almost 70 basis points to 9.20 per cent since early August, while the one-year treasury bill rate is up 50 bps to 7.73 per cent.

Anindya Banerjee, deputy vice president, currency derivatives at Kotak Securities, added: "The RBI is ready to keep real rates high because the policy mandate is to anchor inflation".

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