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At 9:08 a.m. (0338 GMT), the partially convertible rupee was at 59.53/54 per dollar, after rising to as much as 59.40 earlier, but still stronger than its close of 59.76/77 on Tuesday.
The benchmark 10-year bond yield rose as much as 33 basis points to 8.50 percent, its highest since late May 2012.
The 1-year swap rate jumped 41 bps to 9.30 percent, while the benchmark five-year rate rose 27 basis points to 8.45 percent, according to Thomson Reuters data.
The overnight cash rate jumped to 10 percent versus Tuesday's close of 6.50/6.55 percent.
The Reserve Bank of India took new steps to support the rupee, signalling it will stay the course with its defence of the currency despite risks to economic growth.