Khoon Goh, head of Asia research at ANZ Banking Group in Singapore said the mix of strong United States data and the Fed chair's comments bumped up the dollar and USA bond yields, putting downward pressure on Asian currencies.
The rupee, which is now Asia's worst-performing currency, hit new lows earlier today as it plunged to 73.77 against the USA dollar. Bond yields and prices move in opposite directions. Weaker long-term sentiment has weighed on the won, which is closely tied to China though Korea's electronics exports, which may be at risk from the US-China trade war. It also hit a fresh 20-year high against the Indonesian rupiah.
While no changes have been made to the repo rate, the bank has changed its stance from "Neutral" to "Calibrated Tightening".
India now imports more than two-thirds of its oil needs.
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Secondly, the price of the Indian basket of crude oil has increased sharply, by $13 a barrel, since the last resolution.
MARKETS ON EDGE The RBI is also expected to assure markets that adequate funds are available after investors panicked when a series of debt defaults by Infrastructure Leasing & Financial Services (IL&FS) led to redemption pressure at other companies in the shadow banking sector.
On Wednesday the rupee slipped to a low of 73.42 per dollar as crude oil prices breached the 85 US dollars per barrel mark, leading to huge outflows of cash. "The rupee hit yet another record low today and in the near term, it doesn't look like there's any respite coming". Higher prices have swollen India's current account deficit, which last stood at around 2.4 per cent of GDP, in the April-June quarter. Bank Indonesia added 25 bps to its four previous hikes this year, bringing rates to 5.75 percent as expected, or 150 bps higher since May. India imports more than two-thirds of its oil needs.
An expected rate hike would be the Reserve Bank of India's (RBI) third this year, after it lifted borrowing costs in June and August.