Mumbai: Indian rupee on Thursday extended its fall and closed at a new all-time low against US dollar as continued surge in crude oil prices raised concerns of adverse impact on the economy. A cut in excise duty and hike in minimum support prices for winter crop also raised worries of inflationary and fiscal slippage pressure in future.

The rupee ended at 73.58 a dollar, down 0.33% from its Wednesday’s close of 73.34. The home currency opened at 73.67 per dollar and touched a fresh low of 73.82. The 10-year gilt yield closed at 8.157%, up 5 basis points from its previous close of 8.112%. Bond yields and prices move in opposite directions.

Traders are now cautious and will look the Reserve Bank of India’s bi-monthly policy outcome on Friday. Of the 15 economists surveyed by Mint, 14 expect RBI to raise repo rate, the rate at which it lends to commercial banks, to 6.75%. Only one economist expects a 50 basis points hike to 7%.

“The MPC meeting is happening at time when a tale of 2 Cs is unfolding – viz crude oil prices and currency. The INR has depreciated almost 7% since last policy while crude oil prices are up by over 17%. This clearly is a double whammy for and net oil importer nation like India. While the H1 FY2019 CPI is likely to be within RBI target range, key is to see how much could H2 FY19 play spoil sport amid rising crude prices," said Lakshmi Iyer, CIO (Debt) & head of products, Kotak Mahindra Asset Management Company .

“The rising US rates and the intent to effect many more rate hikes would also be a pointer for our policy makers. Hence, it seems like the stage is set for yet another rate hike. Will this hattrick be accompanied by a change in stance is the key thing to watch out for in the accompanying text. Markets seem to already have discounted a rate hike at the current prices and the tone of the policy could be a key determinant for yield movements," Iyer added.

Global currencies too sank after US 10-year treasury yields rose as high as 3.20% after jumping 12 basis points on Wednesday as American businesses added 230,000 workers in September, the most in seven months, data released by the ADP Research Institute showed. Economists predict nonfarm payrolls posted another solid gain in the month. The record employment reading is a positive signal before the official U.S. jobs report Friday.

Comments from US Federal Reserve chairman also dampened the sentiments. The Fed may eventually raise rates to levels where they begin to restrain economic growth, Chairman Jerome Powell said at an event in Washington overnight.

(Bloomberg contributed to this story)

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