Rupee rises 28 paise to 87.81 against US dollar in early trade

Mumbai: The rupee appreciated 28 paise to 87.81 against the US dollar in early trade on Wednesday, tracking the broad decline in the greenback amid hopes of a US Fed rate cut.

Forex traders said investors are closely following the FED Reserve's policy meeting as dollar softness globally is triggering rupee strength. The market is expecting a 25-bps rate cut, and investors will watch out for the Fed Chair's speech for further guidance.

At the interbank foreign exchange market, the rupee opened at 87.84 against the US dollar, then touched 87.81, registering a gain of 28 paise from its previous close.

On Tuesday, the rupee appreciated 7 paise to close at 88.09 against the US dollar.

"The USD/INR pair is expected to remain volatile on Wednesday, supported by a softer dollar and RBI stance, but downward risks for the rupee persist over the medium term due to persistent external pressures and policy uncertainty," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Investors may remain cautious ahead of the Federal Open Market Committee (FOMC) meeting decision this week. A dovish commentary may lead to further decline in the greenback while a hawkish tone may lead to a pullback," he said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 96.73, higher by 0.11 per cent.

Brent crude, the global oil benchmark, was trading 0.20 per cent lower at USD 68.33 per barrel in futures trade.

"The weak-dollar environment, fuelled by expectations of a 25-basis-point Fed rate cut, has given the rupee some breathing room.

"Near-term, the rupee is likely to face resistance around 88.20. Optimism from ongoing US–India trade talks provides additional support, while a decisive break below 87.90 could open the way toward 87.50 and, if momentum continues, 87.20," CR Forex Advisors MD Amit Pabari said.

On the domestic equity market front, Sensex rallied 262.74 points to 82,643.43 in early trade, while Nifty climbed 85.25 points to 25,324.35.

Foreign Institutional Investors bought equities worth Rs 308.32 crore on a net basis on Tuesday, according to exchange data.

Meanwhile, the US on Tuesday described as "positive" the talks between its chief trade negotiator, Brendan Lynch, and his Indian counterpart Rajesh Agrawal for a proposed bilateral trade deal.

The relations between New Delhi and Washington were reeling under severe stress after US President Donald Trump doubled tariffs on Indian goods to a whopping 50 per cent, including 25 per cent additional duties, for India's purchase of Russian crude oil.