The rupee strengthened to a two-month high of 53.67 against the dollar in the morning trade on positive equity markets and expectations of key interest rate cut by the Reserve Bank of India in its annual monetary policy review tomorrow.
The Indian unit had closed at 53.80 per dollar on Tuesday. The forex market was closed on Wednesday for Labour Day.
The rupee jumped to 54.69 in the opening trade on positive domestic equity market and capital flows. At 10 a.m., the rupee was trading at 53.73 to the dollar at the Interbank Foreign Exchange market.
The BSE-benchmark Sensex was trading 93 points higher (up 0.48 per cent) at 19,597.
According to agency reports, the cut in withholding tax on Indian bonds to 5 per cent from 20 per cent also boosted the rupee sentiment.
India cuts tax rates for foreign investors on interest income from investments in government and corporate debt, hoping to attract more funds to bridge the current account deficit, which was at a record of 6.7 per cent in the October-December quarter.
Further, an expectation of at least 25 basis points reduction in repo rate by the central bank will support the rupee sentiment today. A repo rate is likely to revive economic growth in the country.
