The Indian rupee settled on a flat note against the US dollar on Tuesday, inching up just 2 paise to close at 95.68 per dollar. The currency remained range-bound throughout the session as traders weighed mixed global cues and domestic factors.
Market Movements
The rupee opened marginally higher at 95.65 against the previous close of 95.70. During the day, it moved in a narrow band between 95.62 and 95.72, reflecting a lack of strong directional triggers. The dollar index, which measures the greenback against a basket of six major currencies, was trading slightly lower, providing some support to the rupee.
Domestic Equity Markets
Indian equity benchmarks ended with modest gains on Tuesday. The BSE Sensex rose 150 points to close at 62,500, while the NSE Nifty gained 45 points to settle at 18,600. Positive buying in select heavyweights helped the indices recover from early losses. Foreign portfolio investors (FPIs) remained net sellers in the capital markets, offloading shares worth Rs 1,200 crore, which capped the rupee's upside.
Macroeconomic Factors
On the macroeconomic front, India's foreign exchange reserves stood at $560 billion as of the previous week, providing a cushion against volatility. However, concerns over global inflationary pressures and potential interest rate hikes by the US Federal Reserve continued to weigh on emerging market currencies, including the rupee.
Expert Views
Analysts noted that the rupee is likely to remain in a tight range in the near term, with support at 95.50 and resistance at 96.00. The upcoming US inflation data and the Reserve Bank of India's monetary policy stance will be key triggers for the currency. Meanwhile, crude oil prices, which have a direct impact on India's import bill, remained elevated above $85 per barrel, adding to the rupee's vulnerability.
Trading Outlook
Traders expect the rupee to trade with a slight negative bias given the strong dollar demand from importers and the uncertainty surrounding global interest rates. A break below 95.50 could lead to further depreciation towards 96.00 levels. On the upside, sustained FPI inflows or a weaker dollar could push the rupee towards 95.30.
