Mumbai, February 12 The rupee appreciated by 38 paise to 90.40 against the US dollar in early trading on Thursday, supported by foreign fund inflows and suspected RBI intervention.
Forex traders said that while the foreign fund inflows were not massive, they provided a psychological boost. Moreover, the RBI has been quietly ensuring that liquidity remains abundant in the banking system.
At the interbank foreign exchange market, the rupee opened at 90.55 against the US dollar, then gained momentum and touched 90.40, registering a rise of 38 paise over its previous close.
In the initial trade, the rupee also touched 90.56 against the American currency.
On Wednesday, the rupee depreciated by 22 paise to close at 90.78 against the US dollar.
"The RBI has been quietly ensuring that liquidity remains abundant in the banking system. With surplus liquidity hovering near Rs 3 trillion — the highest in six months — banks are flush with cash," said CR Forex Advisors MD Amit Pabari in a note.
Pabari further noted that elevated crude oil prices continued to hover like a silent tax on the economy. Geopolitical tensions remained unresolved, keeping risk appetite restrained.
"Meanwhile, steady dollar demand persisted in the background. Add to that the lingering uncertainty around the US-India trade framework -- including the earlier revisions to the White House fact sheet -- and the mood naturally turned cautious," he said.
Forex traders said that while markets initially welcomed the India-US trade deal, fresh concerns have emerged after the White House released its fact sheet.
The fact sheet highlights key terms of the agreement, including that India will eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.05 per cent lower at 96.78.
Brent crude, the global oil benchmark, was trading 0.42 per cent higher at USD 69.69 per barrel in futures trade.
On the domestic equity market front, the Sensex declined by 349.87 points to 83,883.77 in early trade, while the Nifty was down by 106.60 points to 25,847.25.
On Wednesday, foreign institutional Investors purchased equities worth Rs 943.81 crore, according to exchange data.
