Mumbai: The rupee ended higher on Wednesday against the dollar, responding to the overnight move by the Reserve Bank of India (RBI) to restrict the amount of money banks can borrow through the daily repo window.

The domestic currency ended at 59.13 per dollar, up 1.06% from its previous close of 59.76. It had opened at 59.40 a dollar and hit a high of 59.01 in intra-day trade.

Yields on the benchmark 10-year bond shot up to 8.44% from the previous close of 8.162% in response to tight liquidity conditions. It ended at 8.41%, up 25 basis points from Tuesday’s close. One basis point is 0.01 percentage point.

Overnight interbank call money rates jumped to 10% in morning trade but cooled to 7% at 5 pm, still above Tuesday’s close of 6.5%.

The overnight RBI measures had a direct impact on the market with the one-year commercial paper yield rising to 11.01% on Wednesday from Tuesday’s close of 9.95%.

India’s benchmark Sensex lost 1% to close at 20,090.68 points.

Since January this year, the rupee has weakened 7% and has lost the most among currencies in Asia, excluding Japan, in that period.

On Tuesday, RBI cut the amount of money banks could borrow through its repo window to 0.5% of bank deposits from 1% earlier. It also said banks have to keep a daily average of 99% of their deposits as cash reserve ratio (CRR). CRR, currently at 4%, is the amount of deposits banks have to keep with RBI for no interest.

The central bank’s measures are aimed at curtailing rupee liquidity and preventing banks from borrowing from RBI and buying dollars in the forex market.

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