Rupee rises 4 paise to settle at 85.62 against US dollar

Mumbai: Rupee rose 4 paise to close at 85.62 (provisional) against the US dollar on the back of strong foreign capital inflows.

However, a mixed sentiment in the domestic equity markets, a rise in global crude oil prices, and a stronger US dollar against major currencies capped further gains in the local unit, according to forex traders.

Foreign institutional investors (FIIs) had purchased equities worth Rs 1,992.87 crore on a net basis on Monday, according to exchange data.

At the interbank foreign exchange, rupee opened at 85.62 and registered an intra-day peak of 85.51 and a low of 85.68 before settling at 85.62 (provisional) against the greenback, up 4 paise from its previous close. The local unit had settled at 85.66 against the US dollar on Monday.

"The USD-INR spot pair has been consolidating within a tight range of 85.00 to 86.00, with market participants awaiting a decisive trigger. Comfortable liquidity conditions in the money market, following the cash reserve ratio (CRR) reduction, have led to a softening in forward premiums as interest rate differentials between India and the US continue to narrow. This has made forward hedging less attractive for exporters," Anindya Banerjee, Head Currency & Commodity, Kotak Securities, said.

"We expect the RBI to stay active in the forex market to curb excessive volatility. On the domestic front, India's relatively stable macroeconomic fundamentals continue to provide a firm underpinning to the rupee," he said.

In the domestic equity market, the 30-share BSE Sensex declined 53.49 points to settle at 82,391.72, while the Nifty edged up to close at 25,104.25.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.15 per cent at 99.09.

"The next significant directional cue for the pair is likely to emerge from risk sentiment and the broader trend in the US Dollar Index (DXY), which is currently attempting to establish a short-term base. A sustained move above the 100.00 mark in the DXY could propel USD-INR beyond the 86.00 resistance, with a potential extension towards 86.50," Banerjee said.

Brent crude, the global oil benchmark, rose 0.18 per cent to USD 67.16 per barrel in futures trade.