Indian rupee and bond prices gained on Wednesday after continued fall in crude oil prices eased fears of higher inflation and fiscal slippage.

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Bond prices gained after the Reserve Bank of India said it would inject liquidity into the system via open market operations.

At 09:10 AM, the rupee was trading at 69.97 a dollar, up 47 paise from its Tuesday’s close of 70.44. The home currency opened at 70.08 and touched a high and a low of 69.86 and 70.09 a dollar, respectively.

The yields on the 10-year government bonds fell 1.12 percent to 7.26 percent after closing at 7.35 percent on Tuesday. Bond yields and prices move in opposite directions.

On Tuesday, RBI said it would inject Rs 50,000 crore into the system in January 2019 through a purchase of government securities.

"That is a huge amount of monetisation. It is a huge amount of liquidity support. Clearly, bond markets will celebrate Christmas and Diwali all put together for now," Ananth Narayan, professor of SPJIMR told CNBC-TV18.

On Tuesday, the local currency rallied by a whopping 112 paise, its best single-day gains in over five years, to settle at 70.44 against the US dollar as softening crude oil prices.

Investors' sentiment further got a lift after global benchmark Brent dropped 5.62 percent on Tuesday, at one point marking a 14-month low of $56.16 a barrel. It was up 0.85 percent, or 49 cents, at $56.75 per barrel on Wednesday.

Adding to the optimism was the weak US dollar, which languished close to one-week lows ahead of the US Federal Reserve meeting outcome later in the day.

The Fed is widely expected to raise interest rates by 25 basis points, its fourth rate hike this year though greater focus will center on the policy outlook for 2019, over which there is more uncertainty, reported Reuters.

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