The Indian rupee ended just 1 paisa lower at 73.59 against the US dollar on Thursday despite a weak greenback overseas and a firm trend in the domestic equity markets. RBI's intervention to absorb the dollar inflows kept the rupee steady, traders said.
At the interbank forex market, the local unit opened at 73.52 against the greenback and witnessed an intra-day high of 73.39 and a low of 73.59. It finally ended at 73.59 against the American currency, registering a fall of 1 paisa over its previous close.
On Wednesday, the rupee had climbed 5 paise to finish at 73.58. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.56 per cent lower at 89.94.
Traders said the American currency was trading on a weak note after the US Federal Reserve disappointed investors expecting a shift toward more purchases of longer-dated bonds. The US Federal Reserve pledged to keep its benchmark interest rate near zero until the economic recovery is complete.
On the domestic equity market front, BSE Sensex ended 223.88 points or 0.48 per cent higher at 46,890.34, while the NSE Nifty rose 58 points or 0.42 per cent to 13,740.70 — record highs for both the benchmarks. Foreign institutional investors remained net buyers in the capital markets, purchasing shares worth Rs 1,981.77 crore on Wednesday, according to exchange data.
Brent crude futures, the global oil benchmark, rose 0.74 per cent to USD 51.46 per barrel. "The Indian Rupee ended flat against the US dollar this Thursday, as RBI presence in the markets offset the impact of a weak dollar index and foreign fund inflows," said Sriram Iyer, Senior Research Analyst at Reliance Securities.
Iyer added that "technically, the USD-INR Spot pair still holds a strong support near 73.35 levels from where it has bounced back and closed above 73.55 levels, indicating for a sideways momentum to continue in coming session." According to Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities, the rupee gave back all the early session gains and closed on flat note after RBI's intervention to absorb the dollar inflows.
"Dollar index plunged below 90 level after Fed kept the policy rate unchanged and continued its bond-buying program. Pound and Euro rose to a multi-year high on Brexit negotiations hopes and a weaker dollar," Vakil said. Further, pressure on the Bank of England (BOE) to unveil new easing measures has lessened significantly, traders said.
"Pound gained sharply ahead of the important Bank of England policy statement; expectation is that the central bank could hold rates unchanged and that could keep pound gains in check. "For the next couple of sessions, we expect the USD-INR (Spot) to trade sideways and quote in the range of 73.40 and 74.20," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.