The rupee clawed back its lost territory to settle 13 paise higher at 71.53 to the US dollar on renewed hopes about US-China trade deal.
The Indian unit went through bouts of volatility for a better part of the session as caution prevailed among participants ahead of Reserve Bank's policy meet outcome and also due to uncertainties around global trade deal.
At the interbank foreign exchange, the rupee opened weak at 71.76 against the US dollar. During the day, the domestic unit touched a high of 71.53 and a low of 71.81.
The local unit finally settled for the day at 71.53 against the US dollar, higher by 13 paise over its previous closing.
The Indian rupee on Tuesday had closed at 71.66 against the US dollar.
Forex traders said market participants are hopeful that the Reserve Bank will go for another rate cut in the RBI policy meet on Thursday. Besides, the rupee also got support from foreign fund inflows in primary equity market.
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The US and China are reportedly moving closer to phase-one trade deal despite tensions over Hong Kong and Xinjiang.
"Rupee fell in the opening session against the US dollar but rose after reports showed that the US and China are said to move closer to a deal despite the heated rhetoric," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services Private Ltd.
Somaiyaa further added that "market participants are awaiting for more clarity on the ongoing trade talks between the major two economies and flip-flop in statements is keeping the volatility high for the dollar. We expect the USDINR(Spot) to quote in the range 71.70 and 72.20."