The rupee gained as much as 0.85 per cent in the day before ending stronger at 61.77 against the dollar, as various exit polls predicted that the Bharatiya Janata Party (BJP) will win in four of the five States where elections were held.
While there is a strong anti-incumbency perception against the ruling Congress party, many see the opposition BJP as pro-business.
The rupee had ended at 62.06/$ on Wednesday.
The results of the elections in four States — Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh — will be announced on December 8.
The assembly elections have been widely touted as a semi-final to the national elections in summer next year.
In intraday trade, the rupee gained to as much as 61.53, and the benchmark Sensex ended about 250 points higher.
The 12-day winter session of Parliament — that began today — will be the key to the currency’s fortunes in the near term as passage of key Bills such as insurance and pension will prop up sentiments.
Call down, bond rates flat
The inter-bank call money rate, the rate at which banks borrow from each other to meet their short-term requirements, closed lower at 7 per cent against the previous close of 7.10 per cent.
The 7.16 per cent benchmark government security, which matures in 2023, closed flat at Rs 87.82. Yield on the security was 9.10 per cent.