Published: Fri, October 05, 2018
Money | By Bruce West

India's currency falls to all-time low against USA dollar

India's currency falls to all-time low against USA dollar

Foreign investors remained net sellers for a third day pulling out ₹2,760.63 crore from stock markets.

The Indian rupee plunged as much as 0.64 per cent to a fresh record low of 73.813 against the dollar after hitting an all-time low on Wednesday.

Mr Khoon Goh, head of Asia research at ANZ Banking Group in Singapore, said the mix of strong U.S. data and the Fed chair's comments bumped up the dollar and USA bond yields, putting downward pressure on Asian currencies. In a clear indication that it is not yet done with rate increases, the central bank changed its stance to "calibrated tightening" from "neutral" that was in place since February 2017, Bloomberg reported.

Mr Prasanna went on to reason that India would not want to "fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates".

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.

"For bond markets, a 25 bps hike accompanied by a hawkish stance could trigger the 10-year bond yield to rise to 8.25 per cent", Rao told Reuters after yields surged on Thursday. Indian bond yields spiked as prices fell.

Traders will also focus on US jobs data for September due later on Friday amid growing concerns about rising global yields and US-China trade tensions.

It has projected CPI inflation between 3.8 per cent and 4.5 per cent in the second half of the fiscal and retained GDP growth estimate of 7.4 per cent for 2018-19. Year to date, it has gained 2%.

The market analysts were expecting a repo rate hike to push the value of rupee, which has weakened more than 13 per cent against the dollar so far this year.

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