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Reliance Securities Report
The Indian rupee appreciated against the U.S. dollar on Wednesday as Reserve Bank of India surprised the markets by a rate hike.
The rupee ended at 76.41 a dollar compared with 76.52 close on Monday.
In a surprise meeting between May 02 and May 04, the RBI raised the policy repo rate by 40 basis points to 4.40% and cash reserve ratio will be hikes by 50 basis points to 4.50% effective May 21.
The CRR hike would withdraw Rs 87000 crores ($11.4 billion) from the local banking system.
The bank governor said in a statement that the decision comes while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
The rupee was also supported amid foreign funds flows into the local assets through the LIC IPO which opened for subscription yesterday.
Indian bond yields surged higher, with the 10-year yield after the central bank surprised markets today by hiking the key policy rate while also raising banks’ CRR.
The benchmark 6.54% bond ended at 7.38%, its highest since May 13, 2019, against 7.12% on Monday.
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