The rupee settled 2 paise lower at 83.75 (provisional) against the US dollar in a range-bound trade on Friday as massive sell-offs in domestic as well as global equity markets negated gains from a weak American currency.
The Indian currency resisted the fall due to a sharp decline in the dollar after the latest US data showed slower manufacturing growth in the world's largest economy, forex traders said.
Foreign capital inflows also favoured the local currency, they said.
At the interbank currency exchange, the domestic currency opened at 83.74 and traded in the narrow range of 83.72 and 83.76 against the greenback during the session. The unit finally settled at 83.75 (provisional) against the dollar, registering a loss of 2 paise from the previous closing level.
On Thursday, the rupee declined 5 paise to settle at 83.73 against the US dollar.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said a slight decline in the US dollar amid disappointing economic data from the US may prevent a sharp fall in the rupee. Any fresh intervention by RBI may also support the rupee.
"Traders may take cues from US non-farm payrolls data which is expected weaker than the previous month's reading. USD-INR spot price is expected to trade in a range of Rs 83.50 to Rs 84," Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.27 per cent to 103.92.
Global oil benchmark Brent crude rose 0.28 per cent to USD 79.74 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex plunged 885.60 points or 1.08 per cent to close at 80,981.95, while the broader Nifty declined 293.20 points or 1.17 per cent to 24,717.70.
Foreign institutional investors were net buyers in the capital markets on Thursday and bought shares worth Rs 2,089.28 crore, according to exchange data.
A monthly survey released on Thursday showed India's manufacturing sector growth eased slightly to 58.1 in July from 58.3 in June on a softer uptick in new orders and output, while cost pressures and demand strength led to the steepest increase in selling prices since October 2013.
The government's GST collections in July rose 10.3 per cent to over Rs 1.82 lakh crore, driven by domestic transactions in goods and services, according to official data released on Thursday.
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