Friday, 19 October, 2018


Rupee falls below 74 against dollar as RBI keeps repo rate unchanged

Indian Rupee breaches 73 mark, plunges to fresh all-time low Rupee falls below 74 against dollar as RBI keeps repo rate unchanged
Conrad Doyle | 05 October, 2018, 13:56

On Wednesday the rupee slipped to a low of 73.42 per dollar as crude oil prices breached the 85 USA dollars per barrel mark, leading to huge outflows of cash. "The changed stance indicates that in the current rate cycle RBI has only two options- hike rates in the next policy meeting or keep it unchanged".

Adding to the bullish mood, Federal Reserve chairman Jerome Powell said on Wednesday that the central bank may raise interest rates above an estimated "neutral" setting as the "remarkably positive" United States economy continues to grow. Economists blame rising global crude prices for the slide.

The domestic currency closed at a record low of 73.34, down by 43 paise or 0.59 per cent on Wednesday.

The Indian rupee is the worst performing Asian currency this year, having lost more than 13 per cent.

Research Analysts say sharp rise in the crude oil prices along with steep depreciation in the rupee might push inflation higher in the coming months. Higher prices have swollen India's current account deficit, which last stood at around 2.4 per cent of GDP, in the April-June quarter.

Other Asian central banks in nations running trade deficits and exposed to portfolio outflows and higher oil prices have shown more urgency in hiking interest rates. Bank Indonesia added 25 bps to its four previous hikes this year, bringing rates to 5.75 percent as expected, or 150 bps higher since May.

The central bank's Monetary Policy Committee said that "global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook".

The macroeconomic problems resulting from a depreciating rupee are not Prime Minister Narendra Modi's only concerns.

A labourer carries an iron pipe at the construction site of a residential complex on the outskirts of Kolkata, October 5, 2018.

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