The rupee opened on a flat note and gained 3 paise to 95.34 against the US dollar in early trade on Tuesday, as support from the broad-based weakness in the US Dollar Index amid improving global risk sentiment was negated by dollar demand from importers.
Forex traders said lower oil prices and a softer US dollar outweighed importer demand for dollars, with market participants now turning their attention to the upcoming RBI MPC decision and key US economic data later this week for further direction.
At the interbank foreign exchange market the rupee opened at 95.35, then touched 95.34, registering a gain of 3 paise from its previous close.
Rupee gains as weak dollar supports sentiment
On Monday, the rupee closed at 95.47 against the American currency.
The rupee opened on a flat note and may remain in the range of 95 to 95.50 as oil and dollar index also remain very stable while the market awaits for the RBI Monetary policy decision on Wednesday, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
RBI policy and global cues in focus
A broad-based weakness in the US Dollar Index, improving global risk sentiment, and continued foreign portfolio inflows into Indian equities also supported the rupee. In addition, the Reserve Bank of India (RBI) was reported to have remained active in the foreign exchange market (it received premiums), helping to smooth volatility and reinforce positive sentiment, he said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.99, marginally up by 0.09 per cent.
Brent crude, FII inflows remain key factors
The dollar index slipped below the psychologically important 100 level. The dollar remained under pressure as investors continued to price in a more accommodative Federal Reserve outlook following recent softer US inflation data, Bhansali added.
Brent crude, the global oil benchmark, was trading higher by 1.15 per cent at USD 84.73 per barrel in futures trade, but a sharp correction from the highs above USD100 per barrel seen in July.
The broad decline in Brent prices was driven by easing geopolitical tensions in the Middle East, which reduced concerns about supply disruptions, while expectations of higher OPEC+ production and adequate global supply added to the bearish sentiment, Bhansali said.
On the domestic equity market front, the Sensex climbed 97 points to 78,736.20 in early trade; Nifty down 173.95 points to 24,600.35.
Foreign Institutional Investors (FII) purchased equities worth Rs 922.26 crore on a net basis on Monday, according to exchange data.