Mumbai: Indian rupee on Friday recovered nearly 40 paise from its all-time low of 74.22 but still closed weaker against US dollar after Reserve Bank of India held rates and changed its stance to “calibrated tightening" from “neutral". The home currency ended at 73.77 a dollar, down 0.25% from its Thursday’s close of 73.58. The currency opened at 73.64 against the dollar and touched a fresh low of 74.22.

“RBI’s decision to leave rates unchanged will probably be negative for the rupee given that a hike was priced in. The unchanged decision suggests that the RBI is not overly concerned about INR depreciation," Mitul Kotecha, a senior emerging-markets strategist at TD Securities in Singapore, told Bloomberg.

The six-member monetary policy committee led by RBI governor Urjit Patel voted 5-1 to keep the repurchase rate at 6.50%.

“We expect the RBI to pause in the near term though probability of further rate hikes remain over the next 12 months, dependent on the crude price movement, forex movements, fiscal outcome, and impact of MSP hikes. The change in stance signifies that inflation risks are on the upside and next rate action will be data dependent. In line with what we expected, the RBI’s action and commentary highlighted that the MPC’s mandate remains bound to achieving the headline CPI inflation targets," said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.

Bond yields fell 13 basis points after the RBI unexpectedly kept rates unchanged against a widely expected hike of 25 basis points. Of 15 economists surveyed by Mint, 14 expected the RBI to raise the repo rate, the rate at which it lends to commercial banks, to 6.75%. One economist expected a 50 basis point hike to 7%.

The 10-year gilt yield closed at 8.025%, down 13 basis points from its previous close of 8.157%. Bond yields and prices move in opposite directions.

Traders will also focus on US jobs data for September due later today amid growing concerns about rising global yields and US-China trade tensions. The consensus estimates by Bloomberg is for 180,000 jobs and unemployment at 3.8%. The data in August showed 210,000 jobs created while unemployment was at 3.8%.

Federal Reserve Chairman Jerome Powell also stoked the surge in yields this week when he said the central bank could eventually boost its benchmark past the neutral level.

The benchmark Sensex fell 2.25% to 34376.99 points.

So far this year the rupee has declined 13.5%, while foreign investors have sold $2.44 billion and $7.26 billion in the equity and debt markets, respectively.

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