The rupee posted its biggest single session rise in ten months on Wednesday, propelled by gains in domestic equities and the euro, with dollar inflows also helping.
The partially convertible rupee appreciated by 37 paise to 48.96, 0.8% stronger than Tuesday’s close of 49.345, and its biggest single day rise since December 1, 2010. The rise was unexpected and was driven by the euro and stocks, said a senior foreign exchange dealer with a private bank.
Sustained gains in the local currency are, however, unlikely as worries over the global economy linger, amid high domestic inflation and slowing growth, analysts said.
The rupee is facing a crisis of confidence, a condition which is likely to continue till the end of the current fiscal year, said Arun Singh, senior economist, Dun & Bradstreet.
Government bond yields ended higher on Wednesday as traders trimmed positions on the back of a recovery in local shares and on RBI statement of continuing with tight policy stance until inflation eases. The 10-year benchmark bond yield closed at 8.74%, up 4 basis points on the day, after hitting 8.75% in earlier in the day, its highest since August 28, 2008.