Mumbai: The Indian rupee and bond prices gained after crude oil prices fell to a 14-month low, easing worries of fiscal slippage and higher inflation. The rupee hit a two-week high and gained 1.57%, its biggest single-day gain in five years, while 10-year bond prices touched a fresh eight-month high.

The rupee ended at 70.45 against the dollar, a level last seen on 30 November, up 1.57% from Monday’s close of 71.55. The 1.57% gain was the maximum since 19 September 2013. The currency opened at 71.33 and touched a high of 70.85 against the dollar.

The 10-year government bond yield fell 12 basis points to hit an eight-month low of 7.345%, a level last seen on 9 April, from its previous close of 7.461%. Bond yields and prices move in opposite directions.

Brent crude prices dropped as much as 4% to $57.20 a barrel, its lowest level since October 2017, data compiled by Bloomberg showed. Year-to-date, crude oil prices are down 13.1% — a 33% fall from their 2018 peak of $86.29 per barrel seen on October 3.

India’s trade deficit narrowed to $16.7 billion in November from $17.1 billion a month ago mainly due to a sharp fall in crude oil prices.

“If it is assumed that crude oil prices remain at the current levels and range-bound below $ 65 a barrel, the trade deficit should not widen significantly," Care Rating said in a 18 December note.

Continued buying interest from foreign investors also aided the rupee. FIIs bought $1.76 billion in November, and $677 million in equity and debt to date in December.

“This is positive for the currency because it is normally believed that FPIs withdraw from EMs during this period to book profits. The fact that the investments are positive is a strength for the balance of payments," Care Ratings added.

Care Ratings expects rupee to be around 70-71/$ according to current conditions, and assuming foreign portfolio investments increase and trade deficit remain under control.

The benchmark Sensex rose 0.21%, or 77.01 points, to 36,347.08. Year to date, it has risen 6.5%.

So far this year, the rupee has declined 9.3%, while foreign investors sold $4.44 billion and $7.34 billion in equity and debt markets, respectively.

The dollar index, which measures the greenback’s strength against major currencies, was trading at 97.080, down 0.15% from its previous close of 97.10.

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