The Indian rupee strengthened against the US dollar in the opening trade on Tuesday after the Reserve Bank of India announced that it will transfer a surplus of Rs 1.76 lakh crore to the government as a dividend. The rupee opened at 71.7750 per dollar, up 24 paise from its previous close of 72.02. Intraday, the Indian rupee hit a high of 71.6800 and a low of 71.8625 against the US dollar.

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Yields on the 10-year government bond fell to 6.4227 percent from its previous close of 6.4798 percent. Bond yield and prices move in the opposite direction.

Analysts said the RBI’s decision to transfer the excess surplus to the government boosted market sentiment, supporting the Indian rupee and bond prices. Moreover, speculations that the government may not borrow more following the receipt of the RBI dividend also impacted bonds.

At 10.15 AM, the rupee was trading at 71.86 per dollar, up 0.23 percent from its previous close of 72.02.

The RBI on Monday said its board has decided to transfer a sum of Rs 1,76,051 crore to the government, comprising of Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions. The decision was taken following the recommendations of the Bimal Jalan panel on Economic Capital Framework.

Meanwhile, easing tensions between the US and China have also aided markets. Asian shares advanced after US President Donald Trump hinted at the possibility of a trade deal with China and said he believe Beijing was sincere in its desire to reach an agreement.

Moreover, markets await first-quarter gross domestic data due to be released on Friday. According to a Reuters poll, economic growth has declined to an over five-year low in the June quarter. The poll showed India’s Q1 GDP was expected to have grown at a year-on-year pace of 5.7 percent, a touch slower than 5.8% in the preceding three months.