Rupee plunges to fresh record low of 73.77 against dollar

Indian Rupee breaches 73 mark, plunges to fresh all-time low

"There could be an upward revision in the inflationary projections for the year on account of higher oil prices, increase in MSPs and imported inflation (on back of rupee depreciation)", CARE Ratings said in a research note.

Anticipation of a rate hike has increased in the past month as oil prices climbed, the rupee's slide accelerated and concerns on liquidity emerged.

Investors remained concerned over sustained foreign capital outflows and soaring crude oil prices that crossed the Dollars 85 per barrel. The rupee has lost 110 paise or 1.51% in the three sessions since Monday largely due to strong demand dollar demand from oil importers amid firming oil prices and foreign capital outflows.

The RBI belied market expectations of a rate hike, which was expected to arrest the free fall in the rupee's value.

"You can not wish away the depreciation in the rupee if you are a current account deficit country", he said, adding that another reason to hike is so India does not "fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates".

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.

"However, if oil comes down to $75 a barrel, then the rupee is expected to retract significantly against the greenback", he noted.

It touched record low on Thursday at 73.82 against the dollar.

"Fuel and gas prices are on fire and markets are scurrying".

Meanwhile, the BSE Sensex too plunged by 584.53 points, or 1.66 per cent, to 34,584.63 in late afternoon trade.

DBS economist Radhika Rao also predicted a rate hike.

The 10-year gilt yield stood at 8.061%, down from its previous close of 8.157%.

Anindya Banerjee, deputy vice president, currency derivatives at Kotak Securities, added: "The RBI is ready to keep real rates high because the policy mandate is to anchor inflation". The comments raised the possibility of another Bank Indonesian rate hike before mid-December although it has already raised interest rates five times since mid-May.

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