Rupee breaches 74-mark for first time as RBI keeps key rates unchanged

WION Web Team New Delhi, Delhi, India Oct 05, 2018, 03.01 PM(IST)

File photo. Photograph:( Reuters )

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And dollar selling by the RBI to support the rupee has put a further squeeze on rupee liquidity.

The continuing downfall of Rupee has led to the Indian currency breaching the 74-mark against US dollar for the first time. The Reserve Bank of India (RBI), in a surprise move, kept the key rates unchanged which many analysts feel is the reason for Rupee's further fall.

The rupee has tanked 14 per cent against the dollar this year as investors withdraw from emerging markets.

The RBI raised rates in June and August in part to help shore up the currency, which started 2018 at 63.67 to the dollar.

The partially convertible rupee had hit a life-time low of 73.81 per dollar on Thursday before recovering to 73.62 later in the day.

Confidence has ebbed in India's markets in recent weeks. 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.

A liquidity scare erupted last month after a series of debt defaults by Infrastructure Leasing & Financial Services (IL&FS) sparked redemption pressure at other shadow banking companies.

And dollar selling by the RBI to support the rupee has put a further squeeze on rupee liquidity.

Rising global oil prices, they climbed two per cent on Wednesday to hit a four year-high, are bad news for importing nations like India.

The current account has faced additional pressure as India, like many emerging market economies, has also suffered due to rising US interest rates drawing investors away.

(With inputs from Reuters)