Published: Thu, October 04, 2018
Business | By Eloise Houston

Rupee plunges to record low of 73.77 against U.S. dollar

Rupee plunges to record low of 73.77 against U.S. dollar

Oil prices stood around four year highs on Thursday.

A woman walks past the Reserve Bank of India (RBI) head office in Mumbai, India, December 6, 2017.

After opening at new-record low of 73.26, the Indian currency further dropped to 73.41 per dollar.

Domestic markets were closed on Tuesday on account of Gandhi Jayanti.

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

DBS economist Radhika Rao expects a rate hike, along with the RBI shifting its stance to "hawkish" from "neutral". Bond yields and prices move in opposite directions. The rupee has set all-time lows, bonds are at their weakest since November 2014, and share markets have suffered a sharp correction after hitting record highs in August.

The prices of diesel and petrol surged on Thursday as the price of crude oil crossed $86 per barrel.

Edelweiss Securities expects that external headwinds in the form of surging crude prices and a depreciating rupee continue to be key concerns for the bond markets.

Investors were cautious as the three-day RBI policy review began Wednesday.

Oil prices firmed near the highest level in nearly four years on expectations of a tighter market once United States sanctions on Iran are effective next month.

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 percent since early August, while the one-year treasury bill rate is up 50 bps to 7.73 percent.

So far this year, the rupee has declined 12.07% and foreign investors have sold $2.01 billion and $7.11 billion in the equity and debt markets, respectively.

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