Currency market update: Rupee settles 4 paise lower at 83.96 against US dollar

The rupee consolidated in a narrow range and settled for the day lower by 4 paise at 83.96 (provisional) against the US dollar on Wednesday, weighed down by a recovery in the US dollar and geopolitical tensions in the Middle East. Forex traders said the Indian rupee depreciated on Wednesday on a strong US dollar and positive crude oil prices. 

However, strength in the domestic markets cushioned the downside. At the interbank foreign exchange market, the local unit opened at 83.86 and touched an intraday low of 83.97 against the dollar during the session. It finally settled at 83.96 (provisional) against the American currency, down 4 paise from its previous close.

On Tuesday, the rupee recovered from its all-time low level and settled for the day 17 paise higher at 83.92 against the US dollar. The local unit had slumped 37 paise to settle at an all-time low of 84.09 against the US dollar on Monday. "We expect the rupee to trade with a negative bias on a recovery in the US dollar and geopolitical tensions in the Middle East. 

However, positive global equities may support the rupee at lower levels," said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas. Any further intervention by the Reserve Bank may also support the rupee. Investors may watch out for RBI's monetary policy decision. USD-INR spot price is expected to trade in a range of Rs 83.75 to Rs 84.20, Choudhary added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, gained 0.31 percent to 103.28 points. Brent crude, the global oil benchmark, was trading 1.22 percent higher at USD 77.41 per barrel in futures trade. In the domestic equity market, the 30-share BSE Sensex rose 874.94 points, or 1.11 percent, to close at 79,468.01 points, while the Nifty advanced 304.95 points, or 1.27 percent, to 24,297.50 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth Rs 3,531.24 crore, according to exchange data. Meanwhile, the Reserve Bank's rate-setting panel started its three-day deliberations for the next set of bi-monthly monetary policy on Tuesday amid expectations of no change in benchmark interest rate in view of concerns on inflation and economic growth remaining steady.

The decision of the RBI Governor Shaktikanta Das-headed six-member Monetary Policy Committee (MPC) will be announced on Thursday.