The rupee opened on a flat note and inched 6 paise higher to 73.65 against the US dollar in early trade on Wednesday supported by foreign fund flows.
At the interbank forex market, the rupee was trading in a narrow range. It opened at 73.70 against the American currency, gained some ground and touched 73.65, up 6 paise from its previous close.
On Tuesday, the rupee settled at 73.71 against the US dollar.
"MSCI's decision to tweak the Foreign Ownership Factor for Indian equities, taking into account the government's decision to increase the cap on foreign portfolio investment in Indian equities to respective sectoral FDI caps, would push India's weight in the MSCI EM index to 8.8 per cent from 8.1 per cent currently," said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further added that "this is likely to result in inflows to the tune of USD 4 billion into Indian equities".
According to Goenka, USD-INR is likely to see range bound price action during the day. "We expect an intra-day range of 73.65-74.05," he said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.16 per cent to 93.09.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 94.09 points lower at 40,428.01, and the broader NSE Nifty fell 13.45 points to 11,875.95.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 3,514.89 crore on Tuesday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 1.72 per cent to USD 40.49 per barrel.