The rupee declined by 10 paise to close at 74.94 (provisional) against the U.S. dollar on Thursday after the Reserve Bank of India kept key policy rates unchanged and said it will continue with the accommodative stance.
The RBI kept the benchmark lending rate unchanged for the 10th time in a row at 4 %. The Monetary Policy Committee decided to keep the reverse repo rate unchanged at 3.35 %.
At the interbank foreign exchange, the rupee opened at 74.90 against the American dollar, and later witnessed an intra-day high of 74.88 and a low of 75.05 against the greenback.
The local unit finally ended the day at 74.94, down 10 paise from the previous close of 74.84.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 % lower at 95.48.
"The rupee depreciated against the U.S. dollar after the central bank surprised the market by holding the rate unchanged as traders were expecting a hike in the reverse repo rate. RBI stuck to its dovish tone to ensure an economic recovery, diverging from global policy makers' hawkishness," said Dilip Parmar, Research Analyst, HDFC Securities.
The benchmark 10-year bond yield and rupee fell while domestic equities surged in absence of a hike in reverse repo – the rate at which it absorbs cash from banks.
"Spot USDINR is likely to consolidate in the range of 74.60 to 75.10 following mixed economic signals," Mr. Parmar added.
On the domestic equity market front, the 30-share Sensex ended 460.06 points or 0.79 % higher at 58,926.03, while the broader NSE Nifty settled up 142.05 points or 0.81 % at 17,605.85.
Global oil benchmark Brent crude futures rose 0.14 % to $ 91.68 per barrel.
Foreign institutional investors remained net sellers in the capital market on Wednesday as they offloaded shares worth ₹ 892.64 crore, as per stock exchange data.