MUMBAI: India’s rupee breached 74 to the dollar for the first time ever on Friday as the country’s central bank surprised analysts by holding interest rates.

Economists had expected the Reserve Bank of India (RBI) to hike its key rate as Asia’s third-largest economy grapples with a plummeting currency and soaring oil prices.

But the RBI said the benchmark repo rate - the level at which it lends to commercial banks - would remain at 6.50 percent.

Forty out of 49 economists surveyed by Bloomberg News had predicted a rise of 25 bps.

The hold follows two consecutive rate increases and came as the rupee touched a new record low of 74.10 against the greenback on Friday.

The rupee has tanked 14 per cent against the dollar this year as investors withdraw from emerging markets.

The RBI raised rates in June and August in part to help shore up the currency, which started 2018 at 63.67 to the dollar.

Higher interest rates can attract greater foreign investment, helping to increase demand and subsequently the value of the country’s currency.

Published in Dawn, October 6th, 2018