Rupee Reaps Gain From RBI Windfall

Posts Biggest Single-Day Rise In 5 Months.

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THE rupee on Tuesday clocked its biggest single day rise in five months while Indian bonds edged up to their highest in three weeks after the RBI approved the transfer of a much higher-than-expected dividend to the government allaying fears of a fiscal slippage and releasing more funds for development.

The rupee surged by 54 paise to close at a one-week high of 71.48 vis-à-vis the US dollar. The Indian currency had declined by 36 paise to more than a nine-month low of 72.02 on Monday.

The Reserve Bank's decision to transfer a record Rs 1.76 lakh crore dividend and surplus reserves to the government revived the rupee, forex traders said.

The amount of transfer this year exceeds the aggregate dividend paid out by the central bank in the preceding three years (see chart).

The rupee also gained due to the US dollar weakening against major currencies. The US dollar index, which measures its strength against six global currencies, dropped 0.18 per cent to 97.90 on Tuesday.