Currency Market Update: Rupee trades in narrow range vs dollar in early trade

Rupee traded in a narrow range in morning trade on Thursday, as the support from positive domestic equities was negated by relentless dollar demand from importers.

At the interbank foreign exchange market, the local unit opened at 83.93 and fell to 83.95, registering a loss of 5 paise from its previous close.

On Wednesday, the Indian rupee fell 13 paise to 83.90 against the US dollar.

"The rupee's ongoing decline has been fuelled by a growing trade deficit and relentless dollar demand from importers, placing it under significant pressure," CR Forex Advisors MD Amit Pabari said.

Pabari further noted that "the Reserve Bank of India is expected to step in to prevent the rupee from breaching the critical 84.00 threshold. The market anticipates that the central bank might sell USD to maintain stability. Additionally, the recent dip in crude oil prices to around USD 75.48 per barrel could offer the rupee some much-needed relief." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, gained 0.17 per cent to 101.21 points.

Brent crude, the global oil benchmark, was 0.01 per cent up at USD 76.06 per barrel in futures trade, Meanwhile, the Federal Reserve's recent meeting minutes revealed that most officials are inclined towards a rate cut in September, provided inflation continues to cool. This has increased the likelihood of a Fed rate cut, putting downward pressure on the US dollar and offering some support to the rupee.

Now, all eyes will turn to the Jackson Hole symposium, where Fed Chair Jerome Powell's remarks could set the tone for global currency markets, Pabari said.

In the domestic equity market, the 30-share BSE Sensex gained 166.66 points, or 0.21 per cent, to 81,071.96 points, while the Nifty increased by 55.10 points, or 0.22 per cent, to 24,825.30 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 799.74 crore, according to exchange data.