Rupee rises 3 paise to close at 86.59 against US dollar

Mumbai: The rupee pared initial losses and settled for the day higher by 3 paise at 86.59 (provisional) against the US dollar, as the support from positive domestic equities was negated by unabated foreign fund outflows and month-end dollar demand.

Forex traders said the rupee continued to face pressure due to sustained foreign fund outflows and the broad strength of the American currency in the overseas markets due to unabated dollar demand from oil importers and weak risk appetite.

At the interbank foreign exchange, the rupee opened on a weak note at 86.63 and touched a high of 86.59 and a low of 86.65 against the American currency during the session.

The local unit moved in a narrow range and settled at 86.59 (provisional), higher by 3 paise over its previous close.

On Thursday, the rupee depreciated 7 paise to close at 86.62 against the US dollar.

"Indian Rupee declined today on month-end dollar demand from importers and FII outflows. A positive tone in the US dollar also pressurised the rupee. However, positive domestic markets cushioned the downside," said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.46 per cent higher at 108.29.

Brent crude, the global oil benchmark, was quoted 0.44 per cent lower at USD 76.53 per barrel in futures trade.

"We expect the rupee to trade with negative bias on strength in the US dollar and persistent FII outflows. Month-end dollar demand from importers may also weigh on the rupee.

"Uncertainty over tariffs by the US administration, may also pressure the rupee. However, any central bank intervention may support the rupee," Choudhary said.

The Economic Survey 2024-25, tabled by Finance Minister Nirmala Sitharaman in both houses of Parliament, said navigating global headwinds will require strategic and prudent policy management and reinforcing the domestic fundamentals.

India is expected to record GDP growth of 6.3-6.8 per cent in the financial year 2025-26 on the back of strong fundamentals, calibrated fiscal consolidation and stable private consumption, said the Economic Survey 2024-25 tabled in Parliament on Friday.

The economic growth rate is estimated to slip to a four-year low of 6.4 per cent in the current financial year.

Traders said investors remained cautious ahead of the Union Budget of February 1.

In the domestic equity market, the 30-share BSE Sensex settled 740.76 points, or 0.97 per cent, higher at 77,500.57, while the Nifty rose 258.90 points, or 1.11 per cent, to close at 23,508.40.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 4,582.95 crore in the capital markets on a net basis on Thursday, according to exchange data.