Rupee closes almost flat at 75.59 as dollar demand offsets weak crude cues

The rupee pared early gains to settle on a flat note at 75.59 against the US dollar on Wednesday ahead of the US Federal Reserve's monetary policy decision.

Forex traders said the rupee traded in a range-bound manner in the absence of any major trigger and market participants are eagerly awaiting the Fed’s stance and outlook on the US economy for further cues.

The rupee opened at 75.49 against the US dollar but pared gains to settle at 75.59 against the US dollar, up 2 paise over its previous close.

It had settled at 75.61 against the greenback on Tuesday.

During the four-hour trading session, the domestic unit saw an intra-day high of 75.42 and a low of 75.60.

"The USD/INR spot has continued to remain range-bound as there was no major catalyst to react to. Now the market's focus is on tonight Federal Open Market Committee stance and its outlook on the US economy," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further added that "we don't expect a rate cut by Fed but it may provide a grim outlook and introduce more unconventional measures like yield curve control to keep the rates under control. In USD/INR spot 75 has been acting as crucial support, a break of which is unlikely".

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.25 per cent to 96.08.

Brent crude futures, the global oil benchmark, fell 1.65 per cent to USD 40.50 per barrel

Forex traders said positive domestic equities, sustained foreign fund flows and the revival of business activities are supporting the rupee but dollar buying by banks and oil importers are weighing on the local unit.

"Rupee traded in a range on the back of balance between the buyers of USDINR (the banks on behalf of RBI and oil importers) and sellers of USDINR who are finding the unlock phase as a strengthening point for the economy," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.

The 30-share BSE Sensex settled 290.36 points or 0.86 per cent higher at 34,247.05. The NSE Nifty climbed 69.50 points, or 0.69 per cent, to 10,116.15.

Foreign institutional investors were net buyers in the capital market as they bought shares worth Rs 490.81 crore on Tuesday, according to provisional exchange data.

Meanwhile, investor sentiments remain fragile amid rising COVID-19 cases across the world.

The number of cases around the world linked to the disease has crossed 72.50 lakh and the death toll has topped 4.11 lakh.

In India, the death toll due to COVID-19 rose to 7,745 and the number of infections rose to 2,76,583, according to the health ministry.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.4931 and for rupee/euro at 85.1532. The reference rate for rupee/British pound was fixed at 95.9729 and for rupee/100 Japanese yen at 69.92.