The currency has gained 5% since finance minister P Chidambaram began to announce a series of measures to boost the economy and the sentiment in markets. It closed at 52.86/$ on Friday, a 7.35% gain over the last one year. Most dealers expect the currency to appreciate further as the positive sentiment is expected to sustain.
The government hiked diesel prices in a bid to cut its subsidy burden and Chidambaram approved foreign direct investment in multi-brand retail, aviation and broadcast companies. The government is also mulling an increase in FDI in insurance sector.
On Thursday, economic affairs secretary said the Centre will retain its borrowing target for the year at R5,70,000 crore amid concerns of fiscal slippage. The market borrowing for the second half was left unchanged at R2,00,000 crore.
Dealers say this reflects the governments intent to improve its fiscal balances. The equity markets are looking positively towards the governments disinvestment programme, said NS Venkatesh, head of treasury at IDBI Bank.