The rupee on Wednesday appreciated by 7 paise to settle at 71.24 against the US dollar following gains in the domestic equity market.
Forex traders said rupee consolidated in a narrow range as market participants are assessing the economic implications of the coronavirus outbreak and awaiting cues from the Union Budget.
At the interbank foreign exchange market, the local currency opened at 71.23. During the day, the local unit saw a high of 71.17 and a low of 71.29. The domestic unit finally settled at 71.24, up 7 paise from its previous close.
The rupee had settled at 71.31 against the American currency on Tuesday.
"Indian rupee gained as risk sentiment recovered amid a rebound in the global and domestic equities. Market players assessing the economic implications of the coronavirus outbreak," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.
Meanwhile, Australian scientists said on Wednesday they have successfully recreated the novel coronavirus in a lab, for the first time outside China, a "significant breakthrough" which they say may help combat the deadly virus that has claimed over 130 lives and infected thousands.
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Sharma further said that strong foreign fund flows also supported strength in rupee as they have bought USD 2.21 billion equities so far this month.
"Rupee consolidated in a narrow range ahead of the important Union Budget that will be released later this week," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Somaiyaa further said that on the domestic front, market participants will be keeping an eye on fiscal as well as GDP number.
"Expectation is that the number could disappoint and that could keep the rupee weighed down against the US dollar. We expect the USDINR(Spot) to quote in the range of 71.05 and 71.50," he said.
Meanwhile, the global crude benchmark Brent Futures rose 0.82 per cent to trade at USD 60 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.08 per cent to 98.09.
The 10-year Indian government bond yield was at 6.57 per cent.
Crude prices have seen some moderation in the past few sessions over demand slump amid rising coronavirus cases in China and other regions.
On the domestic equity market front, the 30-share BSE Sensex rallied 231.80 points, or 0.57 per cent, to finish at 41,198.66. Likewise, the broader NSE Nifty closed 73.70 points, or 0.61 per cent, higher at 12,129.50.
Foreign institutional investors sold equities worth Rs 1,014.27 crore on a net basis on Wednesday, according to provisional exchange data.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3263 and for rupee/euro at 78.6211. The reference rate for rupee/British pound was fixed at 93.0918 and for rupee/100 Japanese yen at 65.41.
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