Posting its biggest single-day gain in a week, the rupee strengthened by 31 paise against the dollar to end higher at 58.47 on buoyed expectations from reports of the new government’s plans to cut fiscal deficit and other likely policy initiatives.

The domestic unit closed weaker at 58.78 on Wednesday.

After opening at 58.67 a dollar, the rupee appreciated to 58.41 due to inflows on a Reuters news report that stated the finance ministry was hoping to cut the 2014-15 fiscal deficit to 3.8 - 3.9 per cent of gross domestic product, below the current target of 4.1 per cent.

A lower fiscal deficit may avert a rating downgrade for India lowering the corporate borrowing costs.

Capital flows into the BSE-benchmark Sensex that ended positive at 24,374 points, higher by 76 points (0.31 per cent) over the previous close, also aided the rupee.

Intraday, the rupee moved in the 58.41 – 58.69 a dollar range.

Meanwhile, the Reserve Bank of India is also stacking up dollar reserves to cap the sharp appreciation of the rupee after a stable government at the centre.

Call rates, G-Sec yields drop

The overnight call money rate (the rate at which banks borrow money from each other to overcome short-term liquidity mismatches) closed weaker at 7.10 per cent from 7.75 per cent close on Wednesday.

The yield on the benchmark 8.33 per cent, maturing in 2023, closed at a one-month low of 8.71 per cent from Thursday’s close of 8.76 per cent. The price of the security rose to Rs 100.76 from Rs 100.39. Bond yields and prices move in opposite directions.

beena.parmar@thehindu.co.in

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