Indian rupee collapses to 73.77 against Dollars

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

Rupee plunges to fresh record low of 73.77 against dollar

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

Consequently, the reverse repo rate under the LAF remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. 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.

"The biggest policy anchor for rupee is high real rates".

Surging crude oil prices fueling concerns on widening of current account deficit and capital outflows dragged the currency lower, say analysts.

An expected rate hike would be the Reserve Bank of India's (RBI) third this year, after it lifted borrowing costs in June and August.

It also called for strengthening domestic macro economic fundamentals noting the rising global headwinds including trade tension, rising crude oil prices and tightening global liquidity conditions.

The RBI belied market expectations of a rate hike, which was expected to arrest the free fall in the rupee's value.

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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.

The benchmark Sensex plunged by 527.94 points, or 1.39%, to 35,447.69 in morning deals.

DBS economist Radhika Rao expects a rate hike, along with the RBI shifting its stance to "hawkish" from "neutral".

The 10-year benchmark bond yield fell to 8.08 percent from 8.13 percent before the policy was announced, as traders expected a rate hike were caught wrong-footed.

Analysts ruled out chances of a cut in the central bank's cash reserve ratio (CRR) on Friday.

The central bank on Monday said it will infuse Rs 36,000 crore via bond purchases this month to meet the festive season demand for funds.

Repo rate is the rate at which the RBI lends money to banks and is an important tool for RBI to control inflation.

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