After starting the day at 74.60, the rupee gained momentum to touch the 74.35 and 75.40 marks against the greenback at the strongest and weakest levels during the session, compared to its previous close of 75.16. The rupee settled with a gain of 27 paise (0.36 per cent) at 74.89 on Friday.
Besides lowering the repo and reverse repo rates by 75 basis points and 90 basis points respectively, the central bank reduced the cash reserve ratio - or the cash that commercial banks are required to park with the RBI - by 100 basis points to 3 per cent for one year starting Saturday.
Addressing the media through video conferencing, RBI Governor Shaktikanta Das gave an assurance that the central bank will use all possible measures to support the financial stability of the system and revive growth. Liquidity worth Rs 3.74 lakh crore will be injected into system through various measures, he said.
Analysts said the measures showed the RBI's commitment to aid the already-battered economy's fight against the coronavirus outbreak, which has impacted businesses across the world.
"The policy action will make it unattractive for banks to park funds with the RBI," said Abhishek Goenka, founder and CEO of forex advisory firm IFA Global.
There are still concerns over the degree of the impact of the virus on both Indian as well as global economies.
Domestic equity markets ended a volatile session on a mixed note following the RBI's announcements, with the S&P BSE Sensex index breaking a three-day winning run. The Sensex ended 131.18 points (0.44 per cent) lower at 29,815.59, and the broader NSE Nifty 50 benchmark settled 18.80 points (0.22 per cent) up at 8,660.25.
International oil prices fell as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world. Brent crude - the global benchmark for crude oil rates - was last seen trading 1.8 per cent lower at $25.87 per barrel.
The dollar index - which gauges the greenback's strength against six major peers overseas - rose as much as 0.46 and was last up 0.12 per cent.
The 10-year government bond yield was seen at 6.14 per cent, as against its previous close of 6.22 per cent.
The rupee appreciated by 81 paise or more than 1 per cent against the US dollar on Friday to return to early 74 levels, after the Reserve Bank of India (RBI) lowered the repo rate - the key lending rate - by 75 basis points to support the country against the economic fallout from the coronavirus pandemic. The RBI's decision followed a three-day meeting of its six-member Monetary Policy Committee, which was originally slated to meet early next month for a bi-monthly review. The RBI also lowered the reverse repo rate by 90 basis points. While repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks, reverse repo rate is the rate at which it borrows funds from them. Analysts say the measures will boost liquidity in the system and in turn support the rupee.