The Indian rupee retreated from its early high against the U.S. dollar in late morning deals on Thursday, after the Reserve Bank of India slashed rates unexpectedly on the back of soft inflation.

The central bank cut its repo rate by 25 basis points to 7.50 percent with immediate effect. Consequently, the reverse repo rate was adjusted to 6.50 percent. The bank last reduced its key rates by 25 basis points in January.

The cash reserve ratio was kept unchanged at 4.00 percent.

Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilize available space for monetary accommodation, the bank said.

The rupee reversed from an early 5-day high of 61.56 against the greenback and edged down to 61.92. The rupee may possibly find support around the 62.5 zone.

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