The rupee was quoted 55 paise lower at 74.13 against the dollar soon after the RBI announced its monetary policy, reported PTI. It was further boosted when Fed chairman Jerome Powell suggested that moving beyond neutral interest rates was a possibility. Indian bond yields spiked as prices fell.
On Thursday, the USA dollar touched 1.3828 against the Singapore dollar, its highest since Jul 11 a year ago.
The Indonesian rupiah continued to decline, falling as much as 0.7 per cent versus the dollar and at its weakest in more than 20 years.
Mr Prasanna went on to reason that India would not want to "fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates".
The bank are predicted to act to tackle rising U.S. interest rates, capital outflows from emerging markets and India's weakening balance of payments and current account deficit.
Repo rate is the rate at which the RBI lends money to banks and is an important tool for RBI to control inflation.
China's financial markets are closed for the week.
Stock market traders and investors are now looking for further cues from the Reserve Bank of India's bi-monthly policy meet, which started on Wednesday and will conclude on Friday.
The Indian rupee is the worst performing Asian currency this year, having lost more than 13 per cent.
Analysts attribute the collapsing of the rupee to the weak global trade sentiment, rising crude oil prices and higher demand for the US dollars.
Rupee has been hitting new lows with every passing day over the past few months.
Investors remained concerned over sustained foreign capital outflows and soaring crude oil prices that crossed the United States dollars 85 per barrel. During April-June India's balance of payments slipped into deficit for the first time in six quarters.
Oil prices stood around four year highs on Thursday.
India now imports more than two-thirds of its oil needs.