As RBI holds repo rate, rupee tanks all-time low; Breaches 74-mark against US dollar

The Indian rupee on Friday surpassed the 74-mark to hit an all time low against the US dollar soon after the Reserve Bank of India (RBI) decided to keep the repo rate unchanged changing its stance to “calibrated tightening” from “neutral” earlier. Around 2: 30 pm, the home currency was trading at 74.10, down by 0.61 per cent from its previous day close of 73.58. On Friday morning, rupee opened at 73.64 against the US dollar and touched a low of 74.10. The RBI in Monetary Policy Committee or MPC decided to keep the repo rate unchanged at 6.5 per cent against the widely expected hike of 25 basis points. The six-member monetary policy committee headed by RBI Governor Urjit Patel voted 5-1 to keep the repurchase rate at 6.50 percent on Friday. The RBI had hiked interest rate by 25 basis points each in June and August in the wake of pressure on inflation and volatility in crude oil prices. Speaking to media, RBI Governor Urijit Patel said, “Depreciation of Rupee against US Dollar has been comparatively moderate in comparison to currencies of other EMEs (emerging markets economies).” Further explaining the rationale behind the decision to hold the rates, Patel said that the mandate of the central bank is to target inflation at 4 per cent (with 2 per cent flexibility). He also stated that whatever risks are there have been included in the inflation forecast. "We had two rate hikes earlier. Today's stance is 'calibrated tightening', which means that in this cycle rate cut is off the table," he added. At the Interbank Foreign Exchange (Forex) market, the home currency opened higher at 73.56 against US dollar compared to its previous record low closing of 73.58. But, it failed to sustain the initial strength and fell back to breach the 74-mark. On Thursday, the domestic unit plunged by 24 paise to end at its all time low of 73.58 against US dollar. The BSE Sensex too slipped by 584.53 points, or 1.66 per cent, to 34,584.63 in late afternoon trade.