The rupee staged a sharp recovery on Friday as it appreciated to 199 against the US dollar in the inter-bank market during intra-day trading. This was down to an improvement in market sentiment stemming from an overnight surprise hike in the prices of petroleum products that brought hope of the revival of the International Monetary Fund (IMF) programme.
In the early hours of Friday, the local currency also traded at 198 against the greenback.
Late on Thursday, the government raised the price of petrol and diesel by Rs30 per litre to fulfill the final condition of the IMF for the release of the next tranche of $6 billion bailout worth $900 million. The hike in the prices signalled forthcoming improvement in the economic conditions and reduced the threat of a default-like situation which significantly revived confidence in the foreign exchange market.