Indian rupee leads Asia FX gains after surprise RBI rate hike

Written by Reuters | Singapore | Updated: Jan 28 2014, 19:57pm hrs
Indian rupee, RBIThe Reserve Bank of India increased its policy rate by 25 basis points to 8 pct. Reuters
The Indian rupee led gains among emerging Asian currencies on Tuesday after the Reserve Bank of India (RBI) unexpectedly raised interest rates, with corporate demand providing further support.

The Reserve Bank of India increased its policy rate by 25 basis points to 8.00 percent, though it said it does not foresee further near-term tightening if consumer price inflation eases as projected.

RBI policy review: 'Worried' Raghuram Rajan pulls surprise, raises repo rate 25 bps, leaves CRR unchanged

Elsewhere, the South Korean won and the Taiwan dollar rose on demand from local exporters, while Malaysia's ringgit gained as local investors cut bearish positions.

Still, market participants remained wary ahead of a two-day Federal Reserve meeting at which the U.S. central bank is expected to reduce its bond-buying programme buy another $10 billion, with some foreign investors selling emerging Asian currencies on rallies.

Emerging Asian currencies are not immune to any further fallout from other developing markets such as Turkey, traders and analysts also said.

Reflecting a preference for safer assets, the Singapore dollar rose as investors covered short positions.

The city-state currency found more support from demand against the ringgit.