By Win ThinMUMBAI, India ( TheStreet) -- The Reserve Bank of India hiked rates 25 basis points in an intrameeting move. The reverse repo rate is now 4%, and the repo rate is now 5.5%. The hike itself was not surprising, but the timing was. The regular RBI meeting is only weeks away on July 27. This move suggests that the central bank will move again then as well. A similar move was seen earlier this year, when the RBI hiked 25 basis points between meetings in March and then followed that increase with another 25-basis-point hike at its April meeting. The RBI has also raise commercial bank reserve requirements intrameeting this year, and more hikes there could be seen. Why now? Inflation has stabilized, but it remains at very elevated levels. In May, industrial CPI rose 13.9% year over year while rural CPI rose 13.7% year over year. On the wholesale side, WPI rose 10.2% year over year in May and is still accelerating. The government just hiked gas and diesel prices in June, so look for all the inflation measures to move higher in the coming releases. GDP growth is surging, up 8.6% year over year in the first quarter vs. 6.5% year over year in the fourth quarter, so further tightening is warranted. Despite the prospects of strong growth and higher interest rates, the rupee (INR) was the second worst Asian emerging-market currency in the second quarter, behind only the won (KRW). We remain nervous about the global backdrop, and so INR underperformance is seen continuing. So far in the third quarter, we are seeing a bit of divergence in emerging-market foreign exchange, with most of Eastern Europe gaining against the dollar. Laggards in the third quarter are the Mexican peso (MXN), rupee, won, rand (ZAR), Philippine peso (PHP) and Taiwan dollar (TWD) (all down vs. the dollar). The level to look for ahead is 46.92, the 62% retracement of the May-June drop in the dollar/rupee. A break of that level would target the May high of 47.745.