The Rupee closed slightly stroner on Thursday, shored up by foreign banks' dollar sales and traders cutting intraday short bets while companies' demand to hedge their dollar exposures kept a lid on gains. The dollar index was up 0.1% at 97.8. Later in the day, the focus will turn to central bank decisions in Europe and England with no change in policy rates anticipated by either of the central banks. The Reserve Bank of India, too, is expected to keep rates unchanged at its monetary policy meeting on Friday, after India clinched a trade deal with the U.S. Sterling and UK government borrowing costs fell on Thursday, as investors quickly priced in a much higher chance of a near-term rate cut, after the BOE said it expected a future cut if inflation continued to slow. The decision to keep the bank rate at 3.75% was in line with expectations but the 5-4 vote split was a closer call, with an earlier Reuters poll having pointed to 7-2 vote split. The pound extended losses and hit a near two-week low against the dollar after the decision, and was last down 0.6% at $1.358. UK short-dated two-year gilt yields - which reflect short-term interest rate expectations - headed for their biggest one-day drop since last April, as bond prices rallied, dropping 9 basis points on the day to a three-week low of 3.63%. After the BoE decision traders were pricing in nearly 50 bps of rate cuts by year-end, implying two more quarter-point reductions. This is up from 35 bps by year-end just before the BoE decision. The BoE has also slashed its inflation forecast to 1.7% - below its 2% target - and said it expects inflation to slide to reach that target in April, much sooner than in its early November forecast. UK 10-year gilt yields dipped 2 bps to 4.53%. The Canadian dollar is expected to give back some recent gains over the coming months, but the currency could then re-establish its uptrend if the Bank of Canada shifts to raising interest rates and the greenback faces broad-based selling pressures, according to a Reuters poll. The median forecast of 35 foreign exchange analysts in the January 30 to February 4 poll predicted the Canadian dollar would weaken 0.9% to 1.38 per U.S. dollar, or 72.46 U.S. cents, in three months, matching the forecast in a survey last month. Oil prices fell around 2% on Thursday in choppy trading after the U.S. and Iran agreed to hold talks in Oman on Friday, easing concerns about Iranian crude supplies. Brent crude futures were down $1.59, or 2.29%, at $67.87 per barrel at 1:02 p.m. EDT. U.S. West Texas Intermediate crude was down $1.51, or 2.32%, at $63.63.......