Rupee settles on flat note, higher by 1 paisa at 72.95 against US dollar

The dollar index declined 0.03% to 91.17

The Indian rupee ended just 1 paisa higher at 72.95 against the US dollar on Wednesday amid a firm trend in the domestic equity markets.

At the interbank forex market, the local unit opened at 72.96 against the greenback and witnessed an intra-day high of 72.92 and a low of 72.98.

It finally ended at 72.95 against the American currency, registering a rise of just 1 paisa over its previous close.

The dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.03 per cent to 91.17.

"The USD-INR spot is not breaking the narrow range of 72.75-73.20. Right now, the market is very flat and volatility is muted.

"The bullish sentiments and inflows into local stocks confined the advance in rupee, but for that RBI’s protection around 72.75-73 zone should end," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further noted that traders are waiting for RBI policy outcome for more clarity over the trend.

"We don't expect RBI to cut rates but any hint over future rate cut would be positive for rupee. So until the policy outcome we expect USD-INR spot to continue being sideways," he noted.

On the domestic equity market front, the BSE Sensex ended 458.03 points or 0.92 per cent higher at a record 50,255.75. The broader NSE Nifty advanced 142.10 points or 0.97 per cent to its lifetime high of 14,789.95.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 6,181.56 crore on Tuesday, according to exchange data.

Brent crude futures, the global oil benchmark, rose 0.99 per cent to USD 58.03 per barrel.

"Rupee traded in a narrow range and market participants remained cautious ahead of the important RBI policy statement that will be released later this week.

"Expectation is that the central bank would keep rates on hold but commentary is likely to trigger volatility for the rupee," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

"We expect the USDINR (Spot) to quote in the broad range of 72.80 and 73.25," Somaiya added.

According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian Rupee remained in a narrow trading band amid expectations that RBI could absorb portfolio flows and keep the local unit in a narrow range.

Some support came in the form of positive ending in the domestic equity markets helped by foreign portfolio inflows.

Meanwhile, most Asian currencies were weak this Wednesday as the US dollar index remained steady ahead of key macroeconomic data.