The Indian rupee strengthened by 16 paise to settle at 94.39 against the US dollar on Thursday, driven by positive sentiment in domestic equity markets and a marginally weaker greenback, according to forex traders.
Rupee Gains on Market Optimism
The local unit opened at 94.45 and moved in a range of 94.35 to 94.50 during the session before closing at 94.39. The slight improvement in the dollar index and sustained foreign institutional investor (FII) outflows prevented sharper gains, traders noted.
"Positive cues from the domestic equity markets and a soft dollar index supported the rupee, but FII outflows capped the upside," said a forex dealer.
Domestic Equities Boost Sentiment
Benchmark indices BSE Sensex and NSE Nifty traded in positive territory during the day, reflecting investor confidence. The rally in equities helped buoy the rupee sentiment.
Meanwhile, the dollar index, which measures the greenback against a basket of six major currencies, was trading marginally lower at 92.56, providing support to emerging market currencies including the rupee.
FII Outflows Limit Gains
Foreign institutional investors remained net sellers in the capital markets, pulling out funds on Thursday. This selling pressure prevented the rupee from appreciating further, according to analysts.
"The persistent FII outflows remain a concern for the rupee. However, the overall trend is positive, and we expect the rupee to trade in a 94-95 range in the near term," added the dealer.
Outlook and Key Levels
The rupee has been oscillating in a tight range over the past few sessions, influenced by global cues and domestic macroeconomic data. Traders are now eyeing upcoming economic data and central bank policy moves for further direction.
On the technical front, the rupee is likely to find support at 94.50 and resistance at 94.20 against the dollar.
