The rupee breached the 74 mark against the dollar this afternoon, a new all-time low, soon after the RBI's Monetary Policy Committee (MPC) announced its decision to keep the policy repo rate unchanged. However, the committee has changed its stance to "calibrated tightening" from the 20-month long neutral stance.
The local currency, which opened at 73.64 today, suddenly slipped to 74.21 this afternoon. It is now down 0.85 per cent compared to its previous close, as per Bloomberg data.
The rupee has depreciated 13.5 per cent this year, and is the worst performing Asian currency. Meanwhile, the dollar has strengthened, boosted by a spike in Treasury yields following upbeat US data and the hawkish stance of the US Federal Reserve. In fact, the greenback's gain this year is the highest since the Rs 15 appreciation following the taper tantrums - a term coined to describe market volatility following the US Fed's announcement in 2013 that it would reduce its bond-buying programme.
According to Mint, bond yields fell 10 basis points after the MPC's announcement. The committee voted 5-1 to keep repo rates unchanged at 6.5 per cent, while the markets were expecting a 25 basis points hike, the third one this year. The 10-year gilt yield stood at 8.061 per cent, down from its previous close of 8.157 per cent.
US Federal Reserve Chairman Jerome Powell also stoked the surge in yields this week when he said the central bank could eventually boost its benchmark past the neutral level.
The daily added that traders will now focus on US jobs data for September, due later today amid growing concerns about rising global yields and US-China trade tensions.
Meanwhile, taking cues from the rupee and the RBI's move, the Sensex plummeted nearly 632 points in just an hour from 2.30 pm. It is now down 2.5% at 34,376.99 since opening bell.
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