Rising crude oil prices and foreign fund outflows however limited the gains in the rupee.
The rupee climbed by 54 paise against the US dollar to settle at 71.48 on Tuesday, recovering from a more than nine-month closing low registered in the previous session.
With today's jump, the rupee posted its biggest single-day gain in more than five months against the dollar.
The gain in the home unit came after the Reserve Bank of India decided to payout Rs 1.76 lakh crore of surplus and reserves from its balance sheet to the government.
The rupee opened higher at 71.72 against the greenback, and moved in a range of 71.45-71.87 during the session before shutting shop at 71.48.
Analysts say easing of concerns on the US-China trade front and gains in the domestic equity markets supported the rupee.
The RBI's payout comes at a time the government strives to tackle a nearly five-year low economic growth with lakhs of estimated job cuts across sectors, and defend its ambitious target of containing fiscal deficit at 3.3 per cent of the GDP.
Economists say the payout will likely help the government meet its tax revenue shortfall and fund a higher expenditure.US President Donald Trump said on Monday that his negotiators had received two "very good calls" from China and it was a sign that China is serious about reaching a deal and that talks would begin soon."I think we're going to have a deal, because now we're dealing on proper terms.
They understand and we understand," Mr Trump said.Weakness in the dollar overseas also supported the rupee, according to analysts.
The dollar index - which gauges the greenback's strength against six peers, was last seen 0.08 per cent lower."72.20 is an important resistance and till the time it is trading below 72.30 the trend is bearish for the rupee-dollar pair," said Rahul Gupta, currency research head, Emkay Global Financial Services."The rupee rose sharply higher against the US dollar on hope that the higher-than-estimated surplus transfer by the RBI to the government likely to ease twin deficit concerns," said forex advisory firm IFA Global.
Rising crude oil prices and foreign fund outflows however limited the gains in the rupee.
Brent crude futures - the global benchmark for crude oil - were last seen trading 1.2 per cent higher at $59.39 a barrel, after falling 1 per cent in the previous session dropping for a third day in a row.Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out a net Rs 923.94 crore on Tuesday, provisional data from the NSE showed."However, the development on US-China trade war and performance of emerging market currencies will track the movement in rupee," Mr Gupta added.On Monday, the rupee had ended below the 72 mark against the US currency for the first time since November 14, amid weakness in Asian peers.Get Breaking news, live coverage, and Latest News from India and around the world on TheIndianSubcontinent.com.
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