Mumbai, Sep 16 (PTI) The rupee witnessed a range-bound trade and settled for the day higher by 6 paise at 83.86 against the US dollar on Monday supported by a weak American currency, while firm crude oil prices capped sharp gains.
Forex traders said market participants were eagerly awaiting cues from the US Fed policy on Wednesday, with a rate cut all but certain. However, the magnitude of the cut remains uncertain.
Moreover, the rupee continues to hold steady within a well-defined range on active intervention by the Reserve Bank of India (RBI), they added.
At the interbank foreign exchange market, the local unit opened at 83.89 and witnessed an intraday high of 83.86 and a low of 83.90 against the American currency.
The domestic unit finally settled for the day at 83.86, higher by 4 paise over its previous close, amid a positive trend in domestic equities.
On Friday, the local unit settled higher by 4 paise at 83.92 against the US dollar.
"We expect Indian rupee to trade with a slight positive bias on continued weakness in the US dollar ahead of the FOMC meeting this week," said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
Choudhary further said that "there are broad expectations of a 25 bps rate cut by the Fed following a 25 bps rate cut by ECB last week. Fresh foreign inflows and a positive tone in equity markets may further support the domestic currency. However, a recovery in crude oil prices may cap sharp upside."
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.39 per cent to 100.72 points.
Brent crude, the international benchmark, gained 0.56 per cent to USD 72.01 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex advanced 97.84 points, or 0.12 per cent, to settle at a lifetime closing high of 82,988.78 points, while the Nifty rose 27.25 points, or 0.11 per cent, to 25,383.75 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 1,634.98 crore, according to exchange data.
Meanwhile, India's forex reserves jumped USD 5.248 billion to a new all-time high of USD 689.235 billion for the week ended September 6, the Reserve Bank of India said on Friday.
The overall kitty had jumped by USD 2.299 billion to a record USD 683.987 billion for the previous reporting week.
Maneesh Sharma, AVP, Commodities & Currencies, Anand Rathi Shares and Stock Brokers, said the local currency's muted price action due to the RBI's persistent intervention on the buying side was reflected in the build-up of reserves in recent weeks.
On the flip side, local oil companies remained a "constant buyers (of dollars)" at sub 83.90 levels on the dollar-rupee pair according to state run bank sources.
"With growing odds of a deeper rate cut by the US Federal reserve, the impact on rupee is likely to remain limited amid constant intervention seen by RBI in currency markets since the start of the month, Sharma said.