(PTI) The rupee consolidated in a narrow range and settled for the day higher by 6 paise at 81.81 (provisional) against the US dollar on Wednesday, tracking the weakness of the American currency in the overseas market.
Forex traders said significant foreign fund inflows and crude oil prices below USD 75 a barrel also supported the local unit.
At the interbank foreign exchange market, the local unit opened at 81.80 against the US currency and finally closed at 81.81 (provisional), registering a gain of 6 paise over its previous close.
During the session, the rupee touched a high of 81.75 and a low of 81.86 against the dollar.
On Tuesday, the rupee closed at 81.87 against the US currency.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.41 per cent to 101.54.
Global oil benchmark Brent crude futures fell 2.04 per cent to USD 73.78 per barrel.
The Indian rupee appreciated on a weak US dollar and sharp decline in crude oil prices. However, weak domestic equities capped sharp gains, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
"We expect the rupee to trade with a slight negative bias on risk aversion in global markets amid renewed fears over the banking crisis in the US and worries over global economic recovery.
"However, a weak dollar and extended fall in crude oil prices may prevent a sharp fall in rupee," Choudhary said.
Sustained FII inflows may also support rupee at lower levels. Investors may remain cautious ahead of the Federal Open Market Committee (FOMC) meeting outcome and ISM services PMI.
"The Fed is expected to hike interest rates by 25 basis points. Traders may also remain cautious ahead of non-farm payrolls data later this week. We expect USDINR spot to trade in between 81.30 to 82.30 in the near-term," Choudhary said.
On the domestic equity market front, the 30-share BSE Sensex declined 161.41 points or 0.26 per cent to end at 61,193.30 points, and the broader NSE Nifty fell 57.80 points or 0.32 per cent to 18,089.85 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Tuesday as they purchased shares worth ₹1,997.35 crore, according to exchange data.