Indian central bank keeps key interest rates unchanged

Rupee,Markets,Sensex

The domestic currency was quoted 55 paise lower at 74.13 against the dollar soon after the RBI announced its monetary policy. Rising global crude oil prices, a widening current account deficit at home, and fears of worldwide trade wars have spooked the currency market, leading to several currencies underperforming versus the dollar.

The rupee opened a tad strong at 73.56 a dollar against its previous record low closing of 73.58. Between April and September the rupee has plummeted more than 7 to the dollar and has breached the psychological 73 mark last week.

The Indian rupee closed at 73.77 (73.7675) per USA dollar, 19 paise weaker from its previous close of 73.58.

A higher interest rate in the U.S. will likely prompt the RBI to tighten the policy rate despite a relatively tame inflation, as the central bank seeks to cushion the rupee's fall, the analysts said.

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. Analysts believe that rise in the crude oil prices along with steep depreciation in the rupee might surely push inflation higher in coming months. "Also, the rupee has depreciated to its all-time low to 74 against the dollar should attract NRI property buyers".

India's benchmark 10-year sovereign yield fell to 8.04 per cent. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks.

So far this calendar year, the rupee has been Asia's worst performing currency as it has fallen nearly 15 per cent.

Volunteers bury more bodies from Indonesia quake
Workers said they meant to fix all the damage to the networks and substations and get them reconnected to the grid within days. Yesterday, Australia said it was sending a medical team to the disaster zone and providing an additional US$5 million in aid.

Foreign portfolio investors (FPIs) bought shares worth a net of Rs 1,550 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 1,402 crore Wednesday.

BAML says there's a considerable chance the RBI will raise rates again tomorrow.

The poll of 11 respondents showed investors increased their bearish bets on the Indonesian rupiah over the past two weeks to a more than five-year high, while raising short positions in the Indian rupee slightly.

Still, the expectation was the RBI would give some weight to the argument of supporting the currency to curb future inflationary pressures, according to Prakash Sakpal, an economist at ING Bank NV in Singapore.

In the Monetary Policy Report, the RBI said headline inflation will accelerate to 4.5 per cent by March 2019 quarter with upside risks.

Though the currency had regained its composure over the past few trading sessions because of the measures taken by the Union government, it came under fresh pressure on Wednesday, with crude oil providing the trigger.

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