Indian rupee drops against UAE dirham as RBI hikes key rate

The Indian rupee depreciated 25 paise to 82.75 against the US dollar (22.54 against the UAE dirham) in early trade on Wednesday, tracking muted Indian equities.

Forex traders said the dollar demand in the overseas market and foreign fund outflows weighed on investor sentiments.

In addition, the Reserve Bank of India's (RBI) key repo rate was raised by 35 basis points (bps) on Wednesday as widely expected, the fifth straight increase, with the central bank vowing there will be no let-up in its fight to tame high inflation.

The monetary policy committee (MPC), comprising three members from the RBI and three external members, raised the key lending rate or the repo rate to 6.25 per cent in a majority decision. Five of the six members voted in favour of the increase.

At the Indian interbank foreign exchange, the rupee opened at 82.74 against the dollar, then edged lower to 82.75, registering a loss of 25 paise over its previous close.

On Tuesday, the rupee declined by 65 paise to close at an over-one-month low of 82.50 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.05 per cent to 105.63.

Brent crude futures, the global oil benchmark, advanced 0.09 per cent to $79.42 per barrel.