The Indian rupee sign.
Credit: iStock Photo
Mumbai: The rupee was trading flat at 85.92 against the US dollar in early trade on Tuesday amid a weaker greenback against overseas currencies and a dip in global crude oil prices.
However, FII outflows and continuing uncertainty over the outcome of the India-US trade talks prevented a rise in the domestic unit, according to forex traders.
At the interbank foreign exchange, the rupee opened at 85.97 against the greenback before inching up to 85.92 - the same level as its previous close. The rupee depreciated 12 paise to close at 85.92 against the US dollar on Monday.
"The rupee fell yesterday (Monday) and today opened lower as the dollar index remains up while Asian currencies are slightly weaker from yesterday. The Reserve Bank of India (RBI) sold dollars on Monday, and we wait to see if it continues to do so," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"FPIs were net sellers of shares on Monday and therefore dollar buyers. The CPI of India also came lower at 2.1 per cent, indicating a deflation-type situation, giving the RBI another opportunity to cut rates," he said.
Retail inflation declined to over a six-year low of 2.1 per cent in June, nearing the RBI's comfort zone, on account of subdued prices of food items, including vegetables, driven by widespread monsoon.
Wholesale price inflation (WPI) turned negative after a gap of 19 months, declining 0.13 per cent in June as deflation widened in food articles and fuel, along with softening in manufactured product costs, government data showed on Monday.
Brent crude, the global oil benchmark, was down 0.42 per cent to USD 68.92 per barrel in futures trade.
"Brent oil in a volatile trade fell to USD 69.06 from above USD 71 as the market digested US President Trump's 50-day deadline for Russia to end the Ukraine war and avoid sanctions on buyers of its crude oil like India, while worries continued to linger over Trump's trade tariffs," Bhansali added.
An Indian commerce ministry team reached Washington for another round of talks on the proposed bilateral trade agreement (BTA), according to an official. The four-day talks will start on Monday and conclude on Thursday.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.04 per cent to 98.04.
On the domestic equity market front, the Sensex rose 203.95 points to 82,457.41 in early trade on Tuesday, while Nifty was up 68.85 points to 25,151.15.
Foreign institutional investors (FIIs) sold equities worth Rs 1,614.32 crore on a net basis on Monday, according to exchange data.