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Mumbai: The rupee slipped to a record low of 59.98 on Thursday, triggering sell-offs in bond and equity markets as chairman of the US Federal Reserve Ben Bernanke signalled a tapering of its monthly monetary stimulus, which also spooked stocks, currencies, bonds and commodities globally.
The global meltdown was triggered by indications that the US Federal Reserve may stop the monthly infusion of $85 billion through bond buyback, popularly called QE 3, and a weak Chinese manufacturing data as also the fall of the rupee led to a
massive 526 points slide in the sensex—the biggest single-day loss in 21 months. The close at 18,719, much below the psychologically important 19,000 level, was precipitated by a Rs 2,100 crore net selling by the FIIs on Dalal Street.
Similarly, the rupee also closed at its all-time low of 59.58 against the dollar. But that's not all. Trading in the government bonds market was also suspended for an hour because of a bond price crash, which is a rare occurence. Yields on the 10-year bond had risen by 12 basis points (a basis point is one hundredth of a percentage point).
SLIPPING NOTES
Rupee weakening due to fear of a possible end to US Fed's move to pump money into economy to boost growth
Strengthening dollar, improving economy prompts investors to leave emerging markets and chase US assets
Widening current account and trade deficits fuelling anxiety over dollar outflows
Rupee is not in a shambles. We should not be overly pessimistic... We will take actions when warranted
— RAGHURAM RAJAN CHIEF ECONOMIC ADVISER
The global meltdown was triggered by indications that the US Federal Reserve may stop the monthly infusion of $85 billion through bond buyback, popularly called QE 3, and a weak Chinese manufacturing data as also the fall of the rupee led to a
massive 526 points slide in the sensex—the biggest single-day loss in 21 months. The close at 18,719, much below the psychologically important 19,000 level, was precipitated by a Rs 2,100 crore net selling by the FIIs on Dalal Street.
Similarly, the rupee also closed at its all-time low of 59.58 against the dollar. But that's not all. Trading in the government bonds market was also suspended for an hour because of a bond price crash, which is a rare occurence. Yields on the 10-year bond had risen by 12 basis points (a basis point is one hundredth of a percentage point).
SLIPPING NOTES
Rupee weakening due to fear of a possible end to US Fed's move to pump money into economy to boost growth
Strengthening dollar, improving economy prompts investors to leave emerging markets and chase US assets
Widening current account and trade deficits fuelling anxiety over dollar outflows
Rupee is not in a shambles. We should not be overly pessimistic... We will take actions when warranted
— RAGHURAM RAJAN CHIEF ECONOMIC ADVISER
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