The Indian rupee gained after the Reserve Bank of India (RBI) announced a hike in benchmark repo rate by 25 basis points to 6.35 percent for the first time in over 4 years.
The government's 10-year bond yields rose to a two-week high of 7.92 percent while the prices on the bonds fell. The domestic currency was trading at 67.04 against the US dollar after the announcement, down by 0.16 paise from the previous close.
The rupee was further supported by a depreciation in the American dollar amid trade tensions between the US and its allies. The dollar index, that measures the greenback against a basket of six other important currencies was down by 0.1 percent at 93.83 in the morning trade.
For the first time, the central bank met for three days instead of two, to decide over its stance on the monetary policy. The MPC has maintained a neutral stance on the flexibility of the policy in the future due to "enough" uncertainty said RBI governor Urjit Patel in his press statement.
The decision was based on the backdrop of rising inflation an a weak currency. The rupee had depreciated by nearly 3 percent after the increase in oil prices.