The rupee climbed 0.6% this week to 45.22 per dollar, the biggest weekly advance since the five-day period ended April 9.
The currency pared gains and retreated 0.3% on Friday on speculation the nation?s refiners bought dollars to pay for crude-oil shipments.
The rupee also appreciated this week after a report on May 12 that industrial output grew more than 10% for sixth months.
?The rupee is gaining as the market has already started pricing in billions of dollars that the infrastructure fund is expected to bring in,? said Vikas Babu, a currency trader at Andhra Bank in Mumbai. ?Also, capital inflows into stocks have picked up this week. Dollar demand from oil companies may limit the rupee?s gains in the coming days.?
The yield on the benchmark 7.80% note due May 2020 dropped two basis points to 7.49%.
India?s 10-year bonds rose for a fourth day on speculation cash from Rs 25,400 crore ($5.6 billion) of notes that matured on Friday will be reinvested in debt.
Yields dropped to the lowest level in five months after commerce ministry data showed inflation slowed to 9.59% in April from 9.9% in March. The government raised Rs 12,000 crore of debt on Friday.
?Investors are expecting some demand to replace the securities that have matured,? said Mukesh Kumar, a fixed- income trader with State Bank of Bikaner & Jaipur in Mumbai. ?Inflation is also expected to moderate in the coming weeks as normal rains have been predicted by the weather office.?
The yield on the benchmark 7.8% note due May 2020 dropped two basis points to 7.49 %, according to the central bank?s trading system. Earlier, the rate reached 7.47%, the lowest level since November 27. The price rose 0.11%, or 11 paise per Rs 100 face amount, to 102.15.
The government sold Rs 4,000 crore of 7.38% notes due September 2015, Rs 5,000 crore of 2020 bonds and Rs 3,000 of 8.28 % securities maturing in February 2032. The debt sales are part of the finance ministry?s record Rs 4.57 lakh crore borrowing in the current fiscal year that began April 1.