The rupee appreciated 1 paisa to close at 83.72 (provisional) against the US dollar on Tuesday amid a positive trend in domestic markets ahead of the US Fed policy announcement.
The domestic currency was trading in a tight range of 83.72-83.74 throughout the session.
At the interbank foreign exchange market, it opened flat at 83.73 and ended the day at 83.72 (provisional) against the US dollar, a gain of just one paisa.
Traders said expectations were high that the Federal Reserve might signal a rate cut as early as September. The US Fed has left the borrowing rates at a near-quarter-century high for the past year in its aggressive fight against inflation.
"Strength in the domestic markets and weak crude oil prices supported the rupee. However, a positive US dollar and FII outflows capped sharp gains. The US dollar strengthened ahead of the FOMC meeting with some inflows towards the greenback," Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.
"We expect the rupee to trade with a slight negative bias on positive US dollar ahead of the FOMC meeting and trimming expectations of a rate cut by the US Federal Reserve." In the domestic equity market, the 30-share BSE Sensex rose 99.56 points to settle at 81,455.40, while Nifty inched up 21.20 points to 24,857.30.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was flat at 104.56.
Brent crude futures -- the global oil benchmark -- dipped 0.08 per cent to USD 79.72 per barrel.
Foreign institutional investors were net sellers in the capital markets on Monday, selling shares worth Rs 2,474.54 crore, according to exchange data.
"Month-end dollar demand from importers and OMCs (oil marketing companies) may further pressure the rupee. However, a positive tone in the domestic markets and weak crude oil prices may support the rupee at lower levels," Choudhary said.
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