The Indian rupee recouped most of its early losses and closed marginally lower at 69.28 to the US dollar after the Reserve Bank in a widely expected move cut key interest rates by 0.25 percentage point.

To boost the sagging economy, the RBI Thursday lowered its benchmark lending rate to a nearly nine-year low of 5.75 per cent and changed its monetary policy stance to accommodative, leaving space for future rate cuts.

After opening on a weak note at 69.41 at the interbank forex market, the Indian unit fell further to 69.45 against the US currency. Following the RBI’s Monetary Policy Committee (MPC) decision, the local currency recovered most of the lost ground and settled for the day at 69.28, down 2 paise over its previous close.

The rupee had settled at 69.26 against the US dollar Tuesday.

Indian bonds and Forex markets were closed Wednesday on account of Id-Ul-Fitr.

“Market participants had already priced in the rate cut in monetary policy meet,” said VK Sharma Head-PCG & Capital Market Strategy, HDFC securities.

Forex traders said, foreign fund outflows and rising crude oil prices also kept pressure on the Indian rupee. Moreover, heavy selling in domestic equities also weighed on the local unit.

Foreign funds pulled out Rs 416.08 crore in the capital markets on a net basis Tuesday, provisional data showed.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.04 per cent to 97.28.

Meanwhile, the 10-year government bond yield was at 6.93 per cent on Thursday.

“The sovereign Indian bonds advanced on speculation that the central bank in addition to cutting rates may also take measures to ease liquidity in the banking system,” Sharma said.

Meanwhile, the RBI lowered its growth forecast for the economy to 7 per cent from the April view of 7.2 per cent for the 2019-20 April-March fiscal year.

Brent crude futures, the global oil benchmark, rose 1.20 per cent to trade at USD 61.36 per barrel.

Benchmark indices settled for the day in the negative territory. The 30-share index cracked 553.82 points, or 1.38 per cent, to settle at 39,529.72.

In similar movement, the NSE Nifty plunged 177.90 points, or 1.48 per cent, to end at 11,843.75.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.2918 and for rupee/euro at 78.0009. The reference rate for rupee/British pound was fixed at 87.8324 and for rupee/100 Japanese yen at 64.21.