Rupee trades in narrow range against US dollar in early trade

Mumbai: The rupee traded in a narrow range against the US dollar in early trade on Wednesday as the prevailing risk-off sentiments, and rising crude oil prices weighed on the local unit.

At the interbank foreign exchange, the domestic unit witnessed heavy volatility. It opened at 86.42 against the greenback, then touched an early high of 86.25 against the greenback in initial trade.

On Tuesday, the rupee declined 30 paise to close at 86.34 against the greenback.

Forex traders said geopolitical uncertainties, prevailing risk-off sentiments, and rising crude oil prices, collectively pressured the local currency. Besides, robust dollar demand from oil importers dented investment sentiments further.

"Middle East tensions are fueling safe-haven flows, pulling investors toward the dollar and away from the emerging markets. With global winds blowing in favour of the greenback, the rupee remains under pressure," CR Forex Advisors MD - Amit Pabari said.

Pabari further said that with 86.20 resistance now broken, the USDINR pair is likely to head toward the 86.50–86.80 zone with 86.00 acting as immediate support. Crude strength, trade tensions, and dollar resilience continue to weigh on the rupee.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.16 per cent at 98.66.

Brent crude, the global oil benchmark, rose 0.42 per cent to USD 76.77 per barrel in futures trade, as the Israel-Iran conflict pushed up fears of supply disruptions.

"With oil already putting pressure on India's trade deficit, the added stress of potential pharma tariffs could worsen the current account and inflation trajectory -keeping the rupee on the defensive," Pabari said.

In the domestic equity market, the 30-share BSE Sensex advanced 233.79 points, or 0.29 per cent, to 81,817.09, while the Nifty rose 89.70 points, or 0.36 per cent, to 24,943.10.

Foreign institutional investors (FIIs) purchased equities worth Rs 1,482.77 crore on a net basis on Tuesday, according to exchange data.