Rupee collapses to fresh low of 73.77

Kenny Grant
October 4, 2018

On Wednesday it had plunged by 43 paise to breach the historic low of 73 level. It was further boosted when Fed chairman Jerome Powell suggested that moving beyond neutral interest rates was a possibility.

"Despite a stronger dollar, crude oil prices continued to remain very elevated, which is putting further pressure on current-account deficit currencies that rely on oil imports, India and Indonesia specifically", said ANZ's Goh.

The bank are predicted to act to tackle rising USA interest rates, capital outflows from emerging markets and India's weakening balance of payments and current account deficit. Indian bond yields spiked as prices fell.

Investors were also cautious ahead of the three-day RBI policy review scheduled to begin Wednesday.Sectoral indices led by PSU, metal, infrastructure, power, oil and gas, auto, capital goods, realty and consumer durables stocks were trading in the negative terrain, falling by up to 1.43 per cent.

He said: "You can not wish away the depreciation in the rupee if you are a current account deficit country". Concerns over tariff war and an emerging market sell-off in Turkey and Argentina also weighed on investor sentiment. It stood at 73.77 (73.7688) to a dollar - the lowest ever mark.

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Crude oil prices hit a four-year high in recent weeks as USA oil sanctions on Iran loom next month.

Consistent dollar demand from importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure.

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

A 25 basis point repo rate hike to 6.75 percent would mean a 75 basis point rise since June, the steepest increase since the last tightening cycle, between September 2013 and January 2014, when India faced its worst currency crisis since the 1990s.

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