By Suvashree Choudhury and Arnab Paul
MUMBAI (Reuters) - The Indian rupee posted on a turn-around on Thursday as the dollar weakened globally while stocks also recovered most of the day's loss after a weak opening for both markets.
Government bonds were down on profit booking after a sharp, two-day rally on fears the central bank may not cut rates too soon, given hawkish comment by monetary policy committee members in minutes of their Dec. 5 meeting, released on Wednesday.
The rupee was at 70.05 to the dollar, erasing all the day's losses after trading in a 69.90-70.68 band, from Wednesday's close of 70.39.
The 10-year benchmark bond yield was at 7.27 percent from the previous close of 7.22.
"Typically, in December there is dollar shortage," said a senior forex dealer at a state-run bank.
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"But this year there is no dollar shortage and we are seeing flows into most emerging markets."
Traders shook off concern over a slower-than expected cycle of raising rates by the U.S. Federal Reserve that had led to early weakness in Asian currencies and stocks.
The dollar fell towards a 10-day low on Thursday against its rivals as concern grew the United States may be heading for a sharp economic slowdown next year, despite the Federal Reserve raising interest rates for the fourth time in a year.
After weeks of market volatility and calls by President Donald Trump for the Federal Reserve to stop raising interest rates, the U.S. central bank did it again, and stuck by a plan to keep withdrawing support from an economy it views as strong.
Indian shares trimmed early losses but closed lower, snapping seven sessions of gains.
"There has been some profit booking but there are multiple positive factors and the fundamentals are strong and we can see a positive December," said Vinod Nair, head of research at Geojit Financial Services.
The benchmark BSE index closed down 0.14 percent at 36,431.67, while the broader NSE index ended 0.14 percent lower at 10,951.7.
Financial stocks were among the top drags on both indexes, with State Bank of India closing 2.2 percent lower and Axis Bank Ltd ending 1.4 percent weaker.
The monetary policy committee sounded cautious on inflation and preferred to wait for more data to see for how long price pressure and growth momentum would remain soft, according to the minutes of its meeting.
(Reporting by Suvashree Dey Choudhury in MUMBAI and Arnab Paul in BENGALURU; Editing by Richard Borsuk and Jacqueline Wong)