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

06 October, 2018, 19:55 | Author: Brooke Harris
  • RBI Governor Urjit Patel in Mumbai Friday

After the Reserve Bank of India (RBI) in its fourth bi-monthly policy this fiscal left the policy rates unchanged and ruled out a rate cut in the rest of the fiscal, the rupee plummeted to 74.13 against the dollar, after opening higher then its previous close at 73.52. Currently, the policy rate stands at 6.5 percent. The decision, which was predicted by just nine of 49 economists in a Bloomberg survey, sparked a selloff in the nation's currency and stocks.

The bonds in India surged up after the surprise move by India's Central Bank - RBI to keep the repo rate and short-term lending rate intact without any change. Indonesia's central bank governor stressed the need to raise interest rates before the Fed to avoid "drastic" capital outflows in the wake of a heavily flagged Fed hike in December. In real effective term, the rupee fall has been at 5 per cent, he added. "Against this backdrop, the impact of cost-push factors should be limited and transient and, as the output gap again turns negative, underlying inflation should converge back towards 4.5 percent". Firstly, it ascertained that inflation was in a manageable range given the recent decline in food prices.

The panel's decision comes at a hard time for Indian policy-makers.

The RBI has also been preoccupied with a liquidity scare arising from a series of debt defaults by Infrastructure Leasing & Financial Services (IL&FS) that sparked redemption pressure at other shadow banking companies. Indonesia has a large current account deficit stemming from its oil imports. This is the rate at which it lends money to domestic banks.

Koepka Describes ‘Worst Day’ After Ryder Cup Fan Loses Sight In Eye
The Tour said: " Ball strikes are an occasional hazard for spectators but this kind of incident is extremely rare ". It's upsetting, it really is, I hit a golf ball and someone lost their sight in their eye.

The market did not react well to the RBI's decision.

The 30-share Bombay Stock Exchange Sensex fell sharply, with investors anxious that the fall in the rupee and increase in crude-oil prices would further widen the trade deficit.

Investors remained concerned over sustained foreign capital outflows and soaring crude oil prices that crossed the United States dollars 85 per barrel.

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