MUMBAI - The Indian rupee lost 1.5% on Wednesday, suffering its biggest single-day fall in 20 months as the central bank mapped out plans for a massive government bond buying programme.
The partially covertible rupee ended at 74.55 per dollar versus its previous close of 74.43, marking the biggest daily fall since Aug. 5 2019. Earlier, the rupee touched 74.5550, its weakest since Nov. 17.
The Reserve Bank of India (RBI) kept interest rates at record lows on Wednesday but its commitment to a massive government bond purchase programme raised prospects of plenty of rupee liquidity, and potential inflation, both of which undermined sentiment toward the currency.
"The forex market wasn't expecting such a dovish stance and rupee got set on fire," said Rahul Gupta, head of currency research at Emkay Global Financial Services, who now expected the exchange rate to trade between 73.50-74.50 rupees per dollar.