Treasury chiefs ruled out any big impact of the cut on the rupee, but added that other Asian currencies are likely to rally. "The rupee has been gaining ground against the dollar on account of increased Foreign Institutional Investors (FII) inflows and importers not covering," a dealer at a private bank said. The US Fed Reserve cut its overnight bank lending rate to 5 per cent from 5.25 per cent and also pared its key rate at which it lends emergency loans to commercial banks to 4.75 per cent from 5 per cent which saw world stock markets surge on Friday.

"The rupee will gain against all the non-dollar currencies like the yen,duetche mark and pound sterling. After the dollar had been under increased attack in the past few days, these currencies have appreciated against the rupee. Now, with the Fed Rate cut the rupee should correct this and appreciate against these currencies," PH Ravikumar, executive senior vice president (treasury) of ICICI Bank said.

The Indian unit has lost considerable ground to the Japanese yen, pound sterling and to a small extent to the Deutche Mark. The yen appreciated to 36.35 on October 9 from 31.44 on October 9. It ended at 36.22 on October 16. Similarly the pound sterling had appreciated to 72.52 on October 9 from 71.83 on October 5 and ended at 71.20 on October 16.

Despite a whopping loss to the yen the rupee has gained against the dollar. "The rupee has gained nearly 1 per cent after the Reserve Bank hiked the short-term repo rate by 300 basis points and hiked the Cash Reserve Ratio by 100 basis points on August 19," Ravikumar said. The rupee had touched an all time low of 43.70 but has nowrecovered almost by 1 per cent in the past two months almost unnoticed. I-Sec, the investment banking arm of ICICI, has said in its weekly commentary on markets that the the rupee was steady through the week and ended at 42.30 against the greenback.