Rupee gains at 42.86 against USD after key rate hike

Mumbai, Jun 25: Rupee today bounced back to strengthen at 42.86/87 against US Dollar, gaining ten paise from its previous close of 42.96/97 after the Reserve Bank key rate hike. The Indian unit strengthened after the prompt action taken by the Central Bank last evening to tame the spiraling inflation, raised CRR and repo rate by 50 basis point, dealers said.

After the market closed yesterday, the RBI raised its short term lending rate for the banks -- repo rate by 50 basis points to 8.5 per cent with immediate effect, its highest since March 2002 and was the second hike this month. The Apex Bank had also raised CRR, the proportion of deposits that banks must keep with the central bank, to 8.75 per cent from 8.25 per cent in two stages of 25 basis points each on July 5 and July 19.

Dealers anticipated the Rupee appreciation after the RBI's move.

UNI