RBI keeps policy rate unchanged in surprise move, rupee tumbles

RBI Governor Urjit Patel in Mumbai Friday

In a clear indication that it is not yet done with rate increases, the central bank changed its stance to "calibrated tightening" from "neutral" that was in place since February 2017, Bloomberg reported.

A rally in crude oil prices is expected to put more pressure on the rupee and it may send it near the 74-mark, said analyst Bhaskar Panda.

As per the RBI's fourth bi-monthly monetary policy statement, the key lending rates have been kept intact on the back of an uncertain global economic scenario. Five of the six panel members voted to leave the rate unchanged.

Mr Prasanna went on to reason that India would not want to "fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates". The question was only of timing, said Radhika Rao, an economist at DBS in Singapore.

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

The rupee, which inched towards 74 to the dollar on Thursday, has fallen 13.5 per cent in 2018, making it Asia's worst-performing currency.

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The decline steepened in recent weeks as rising crude price - India imports two-thirds of its oil needs - and a sell-off by investors in emerging markets cranked up the pressure on the country's external balances.

Repo rate is the rate at which the RBI lends money to banks and is an important tool for RBI to control inflation.

Last week, Bangko Sentral ng Pilipinas (BSP) hiked rates by 50 bps to 4.50 percent, adding to the three hikes worth 100 bps since May.

"The biggest policy anchor for rupee is high real rates".

Traders will also focus on US jobs data for September due later on Friday amid growing concerns about rising global yields and US-China trade tensions.

Gandhi Wednesday hit out at Prime Minister Narendra Modi questioning his silence over the falling value of the Indian Rupee.

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