Rupee sinks to historic low, Centre anxious

Rupee sinks to historic low, Centre anxious

The bank are predicted to act to tackle rising U.S. interest rates, capital outflows from emerging markets and India's weakening balance of payments and current account deficit. Consistent dollar demand from importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure. 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.

The rupee fell steeply by 43 paise to breach the historic low of 73.34 after crude oil prices crossed $85 a barrel fuelling concerns over capital outflows and widening current account deficit in the country. It slid to an all-time low of 73.81 per dollar due to rising crude prices and reports that the RBI "cannot afford" a special swap window for oil importers to meet the dollar demand.

Oil prices stood around four year highs on Thursday.

China's financial markets are closed for the week.


The central bank retained the repo rate unchanged at 6.50 per cent, while the reverse repo rate also stayed at 6.25 per cent.

The central government and mostly BJP-led states announced a cut in excise and Value-Added Tax rates to reduce fuel prices by 5 per litre.

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

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 question was only of timing, said Radhika Rao, an economist at DBS in Singapore. "Raising the repo rate will increase the real interest rates and help in attracting fresh foreign inflows which will help in containing the rupee".

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