The dramatic drop sparked furious comments from Rahul Gandhi, the Indian National Congress, who expressed his dismay at the turbulent rupee.
The rupee opened weak at 73.72 against the previous close of 73.34. "It's not breaking - it's Broken". The Street is expecting from the central bank a third back-to-back repo rate hike as inflation is expected to accelerate further due to higher crude prices and the weakness in rupee.
The macroeconomic problems resulting from a depreciating rupee are not Prime Minister Narendra Modi's only concerns.
"Fuel and gas prices are on fire and markets are scurrying. Till when will the 56-inch chest be on "silent mode", he tweeted and asked what happened to the promise of "achche din".
It comes just one day before the Indian central bank is expected to raise rates on Friday to prop-up the rupee.
Analysts attribute the collapsing of the rupee to the weak global trade sentiment, rising crude oil prices and higher demand for the USA dollars.
"On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) chose to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent", RBI said in a statement on Friday. India imports more than two-thirds of its oil needs. The question was only of timing, said Radhika Rao, an economist at DBS in Singapore.
Asian currencies fell on Thursday (Oct 2) after robust U.S. economic figures and bullish comments from the Federal Reserve boosted the USA dollar, prompting sustained regional outflows.
US Treasury yields jumped to multi-year peaks on Wednesday, with the 10-year yield reaching a seven-year high after Wednesday's robust data bolstered the case for the Fed to raise interest rates again in December and beyond. "Raising the repo rate will increase the real interest rates and help in attracting fresh foreign inflows which will help in containing the rupee". Brent, the global benchmark for crude, traded at $85 in Wednesday morning trading.