Mumbai: The rupee pared its early gains to settle almost flat at 74.33 against the US dollar on Tuesday, tracking muted domestic equities.
Analysts said the rupee closed steady due to suspected intervention by the RBI amid forex inflows and positive global cues.
At the interbank forex market, the domestic unit witnessed highly volatile trade. It opened on a strong note at 74.17, but lost ground during the day and finally ended at 74.33 against the greenback, down 1 paisa over its previous close of 74.32 against the American currency. The rupee had surged to a five-month high on Monday on capital inflows.
During the day, the local unit witnessed an intra-day high of 74.17 and a low of 74.51 against the US dollar.
“The Indian rupee ended little changed against the dollar on Tuesday as suspected central bank intervention in the spot market offset the impact of positive regional cues and persistent greenback inflows,” said Sriram Iyer, Senior Research Analyst, Reliance Securities.
According to Iyer, news of a potential coronavirus treatment and indications that the phase-one US-China trade deal remained on course supported risk sentiment in the region.
Moreover, Asian currencies were higher and lent support. The onshore Chinese Yuan strengthened to near 6.90 to the dollar.
Traders now await Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole summit on Thursday for further cues.
Meanwhile, the Reserve Bank of India said it will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for an aggregate amount of Rs 20,000 crore in two tranches.
The auction will be in held in two tranches of Rs 10,000 crore each and will be conducted on August 27 and September 3, 2020, the RBI said in a statement.
“We see the rupee to remain range bound following sharp up-move on the back of foreign fund inflows yesterday. Tone remain bullish on easy liquidity and optimism about COVID-19 vaccine. From the domestic economic data points, we also see fast recovery in high frequency indicators, better monsoon progress,” HDFC Securities Deputy Head Retail Research Devarsh Vakil said.
Vakil further said that “in near term, rupee expected to trade with positive bias and we could see level below 73.80 a dollar. The bullish trend in rupee will negate only above 75 and strength above 73.80 opens for 73.36 a dollar, 50 Week Simple moving average”.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.12 per cent down at 93.18.
On the domestic equity market front, key stock indices Sensex and Nifty extended gains for the third day. The 30-share BSE benchmark Sensex closed 44.80 points or 0.12 per cent higher at 38,843.88. The NSE Nifty inched up 5.80 points or 0.05 per cent to close at 11,472.25.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 219.07 crore on Monday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.27 per cent to USD 45.25 per barrel.