Mumbai, February 10 The rupee reversed its initial losses and ended on a positive note on Tuesday, gaining 10 paise to close at 90.56 against the US dollar, supported by positive signals from domestic equities and the weakening of the US dollar in the overseas market.
Forex traders said that the rupee is experiencing sideways price action as the support from positive domestic equities and foreign fund inflows was offset by geopolitical tensions and demand for the dollar from importers.
At the interbank foreign exchange market, the rupee opened at 90.63 against the US dollar, then lost ground to touch a day's low of 90.77 and a high of 90.48 against the greenback.
The rupee eventually closed at 90.56, registering a gain of 10 paise over its previous close.
On Monday, the rupee witnessed volatile trading and ended the day slightly lower, down 1 paisa at 90.66 against the US dollar.
"We expect the rupee to trade with a slightly positive bias due to strength in the domestic markets and optimism regarding trade deals. A weaker dollar and fresh foreign inflows may further support the rupee."
"However, geopolitical tensions and demand for the dollar from importers may limit any sharp gains. Traders may remain cautious ahead of the non-farm payrolls report on Wednesday. The USD/INR spot price is expected to trade in a range of 90.30 to 90.80," Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan, said.
Dilip Parmar, Research Analyst, HDFC Securities, said, "This upward trend (in the rupee) is further reinforced by a shift in investor sentiment, as foreign institutional funds have turned net buyers in domestic equities and bonds this month."
Meanwhile, the dollar index, which measures the strength of the US dollar against a basket of six currencies, was trading 0.01 per cent higher at 96.82.
The dollar index has fallen below the 97 level amid ongoing weakness and a shift away from dollar assets. Chinese regulators have urged banks to reduce their exposure to US Treasury bonds due to US policy risks.
Brent crude, the global benchmark for oil, was trading 0.16 per cent lower at USD 68.93 per barrel in futures trade.
On the domestic equity market front, the Sensex rose by 208.17 points to close at 84,273.92, while the Nifty rose by 67.85 points to 25,935.15.
On Tuesday, foreign institutional investors purchased equities worth Rs 69.45 crore, according to exchange data.
