Rupee falls below 74 against dollar as RBI keeps repo rate unchanged

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The domestic currency closed at 73.34 on Wednesday.

Mr Khoon Goh, head of Asia research at ANZ Banking Group in Singapore, said the mix of strong United States data and the Fed chair's comments bumped up the dollar and USA bond yields, putting downward pressure on Asian currencies.

An expected rate hike would be the Reserve Bank of India's (RBI) third this year, after it lifted borrowing costs in June and August.

Rupee slipped to a record low 74.22 per dollar, down 64 paise from previous close 72.58 per dollar.

The South Korean won shed around 1 per cent versus to the dollar to its weakest in more than two weeks.

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The central bank's Monetary Policy Committee said that "global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook". It also hit a fresh 20-year high against the Indonesian rupiah. Indonesia's central bank governor stressed the need to raise interest rates before the Fed to avoid "drastic" capital outflows in the wake of a heavily flagged Fed hike in December. The rupee has depreciated around 15% in 2018 and is the worst-performing currency in Asia.

Surge in global crude oil prices and weakness in the rupee could push the officials to raise rates, but importantly focus will be on whether central bank raises its inflation forecast for the latter half of the year.

The Reserve Bank of India (RBI) held interest rates unchanged at a policy meeting on Friday, sending the rupee tumbling to a record low and stunning analysts who had expected a rate increase to combat inflationary pressures arising from high oil prices.

Rupee has been hitting new lows with every passing day over the past few months.

India now imports more than two-thirds of its oil needs.