Mumbai: The Indian rupee closed 0.57% stronger, the maximum in eight month, against the US dollar on Wednesday, after finance minister Arun Jaitley announced a fiscal deficit target that was in line with estimates. This is the sixth consecutive session when the rupee closed higher.

The home currency closed at 67.48—a level last seen on 14 December 2016, up 0.58%, biggest gains since 25 May 2016, from its previous close of 67.87. The local currency opened at 67.61 a dollar, and touched a high and a low of 67.48 and 67.68 respectively.

The finance minister has announced a fiscal deficit target of 3.2% for the financial year 2017-18 up from the goal of 3% set earlier. Analysts had estimated 3-3.3% fiscal deficit target.

“Overall, the government’s decision to stick to fiscal consolidation – despite the growth hit caused by demonetisation and the upcoming state elections – is a positive signal", Nomura India chief economist Sonal Varma said in the note.

The recent rally in the rupee was also due to continued buying from foreign institutional investors (FIIs) in the local equity markets. FIIs bought nearly $451 million in equity over the last nine trading sessions and have been buyers on all but one trading session during this period.

India’s benchmark Sensex index rose 1.76% or 485.68 points to closed at 28,141.64. So far this year, Sensex has risen 5.7%.

The finance minister announced less-than-estimated borrowing programme at Rs3.48 trillion via bonds in FY18 versus Rs4.25 trillion last years budgeted.

“Additional entry in this budget which specifically provides for buyback of securities by the government is the source of confusion with regard to net borrowing numbers," said Edelweiss Securities in a note to its investors.

However, the finance ministers figure is net of not only redemption’s in the year but also nets out the buyback of 5,000 crore penciled in for FY18, which has not been the practice so far. On similar lines, the govt has undertaken buyback of 0,000 crore in the current financial year as well, which brings down the net borrowing for FY17 to 3.47 trillion, Edelweiss said.

“So in terms of comparable numbers for the two years, the net borrowing is quite similar and so the markets should not be too disappointed or overly euphoric with the borrowing targets," Edelweiss Securities note added.

India’s 10-year bond yield closed at 6.431% compared to its Tuesday’s close of 6.407%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has gained 0.67%, while FIIs have sold $6.4 million in local equity and $382.40 million in debt markets.