Currency update: Rupee rises 4 paise to close at 83.88 against US dollar

The rupee witnessed range-bound trade and settled for the day higher by 4 paise at 83.88 (provisional) against the US dollar on Monday supported by weak American currency and significant foreign fund inflows, while firm crude oil prices capped sharp gains.

Forex traders said market participants are eagerly awaiting cues from the US Fed policy on Wednesday, with a rate cut all but certain. However, the magnitude of the cut remains uncertain.

Moreover, the rupee continues to hold steady within a well-defined range on active intervention by the Reserve Bank of India (RBI), they added.

At the interbank foreign exchange market, the local unit opened at 83.89 and witnessed an intraday high of 83.87 and a low of 83.90 against the American currency.

The domestic unit finally settled for the day at 83.88 (provisional), higher by 4 paise over its previous close, amid a positive trend in domestic equities.

On Friday, the local unit settled higher by 4 paise at 83.92 against the US dollar.

"We expect Indian rupee to trade with a slight positive bias on continued weakness in the US dollar ahead of the FOMC meeting this week," said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

Choudhary further said that "there are broad expectations of a 25 bps rate cut by the Fed following a 25 bps rate cut by ECB last week. Fresh foreign inflows and a positive tone in equity markets may further support the domestic currency. However, a recovery in crude oil prices may cap sharp upside." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.39 per cent to 100.72 points.

Brent crude, the international benchmark, gained 0.56 per cent to USD 72.01 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex advanced 97.84 points, or 0.12 per cent, to close at 82,988.78 points, while the Nifty rose 27.25 points, or 0.11 per cent, to 25,383.75 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday, as they purchased shares worth Rs 2,364.82 crore, according to exchange data.

Meanwhile, India's forex reserves jumped USD 5.248 billion to a new all-time high of USD 689.235 billion for the week ended September 6, the Reserve Bank of India said on Friday.

The overall kitty had jumped by USD 2.299 billion to a record USD 683.987 billion for the previous reporting week.