The rupee rebounded to 71.99, boosted by a fall in global oil prices and on the central bank's announcement to buy bonds via open market purchases.
The rupee opened at 72.17 to the dollar, its strongest since September 21 and compared with 72.6750 on Tuesday, while the 10-year benchmark bond yield fell to as much as 7.70 per cent, its lowest since August 2. The paper had ended at 7.76 per cent on Tuesday.
The rupee hovered in a range of 72.40 and 71.99 before quoting at 72.26, up 41 paise at 4.10 pm local time.
The Reserve Bank of India will buy Rs 12,000 crore ($1.65 billion) of government bonds on Thursday via open market operations. Oil markets struggled to find their footing on Wednesday after plunging 7 per cent in the previous session, with surging supply and the spectre of faltering demand keeping investors on the edge.
Strengthening of rupee eased the concerns over widening current account deficit and inflation. The rupee sentiment was also supported by dollar selling by exporters and banks and the dollar’s weakness against other currencies overseas.
Brent crude, the international benchmark, dropped almost 7 per cent to a one-year low of $65 a barrel after the US President Donald Trump urged Organization of the Petroleum Exporting Countries (OPEC) and Saudi Arabia to maintain their current policy of gradually increasing output, which helps to cap the oil prices.
Meanwhile, foreign institutional investors had sold shares worth Rs 494.95 crore on Tuesday. The Sensex ended down by 2.50 points, or 0.01 per cent, at 35,141.99.