The Indian rupee slipped to a record low and government bond yields fell on Tuesday, as the appointment of career bureaucrat Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) prompted traders to ramp up bets on rate cuts.
Reuters reports that the rupee fell to 84.85 per U.S. dollar, surpassing its previous all-time low of 84.7575 hit last week, while the 10-year bond yield IN067934G=CC fell 2 basis points to 6.6954%.
The RBI likely stepped in to support the rupee, traders said.
Malhotra, currently the revenue secretary to the finance ministry, has been appointed as the RBI governor for a three-year term starting Dec. 11 after outgoing governor Shaktikanta Das’s six-year term ends on Tuesday.
Das’ exit, economists said, could add a dovish tilt to India’s monetary policy committee as Das and RBI Deputy Governor Michael Patra were seen as the most hawkish members of the six-member rate-setting panel.
Patra’s term concludes in mid-January and the government is looking for a replacement.
Sanjay Malhotra’s appointment comes at a time when the Indian economy’s growth has slowed while inflation remains elevated, complicating the outlook for monetary policy.
“With Malhotra’s appointment, there is an expectation that there will be a tilt towards supporting growth, and bond yields are reacting to that,” said Anshul Chandak, head of treasury at RBL Bank.
