The rupee on Friday staged a smart recovery as it gained 27 paise to close
at 82.94 against the dollar on suspected intervention from the Reserve Bank of India (RBI) even as a positive trend in equity markets and the central bank’s move to withdraw the incremental cash reserve ratio (ICRR) helped to lift the currency.

Weakness in the dollar as reflected in the Dollar Index, which fell below the 105 mark, and a fall in US treasury yields also contributed to the rupee appreciating above the 83 mark.

At the inter-bank forex market, the domestic currency opened at 83.13 against
the dollar and traded between 82.91 and 83.17 amid talk of dollar selling by state-run banks on behalf of the RBI. It finally settled 27 paise higher at 82.94.

Anuj Choudhary — research analyst at Sharekhan by BNP Paribas — said that the rupee gained as the RBI has decided to discontinue the ICRR in a phased manner by October 7.

He added that reports of the central bank’s intervention in the forex markets to protect the rupee ahead of the G20 meeting also supported the domestic currency.

Further, positive domestic markets and softening of crude oil prices also prevented a fall in its value.

“We expect the rupee to trade with a slight positive bias on positive domestic equities and intervention by the RBI. However, an overall strong dollar and elevated crude oil prices may cap the upside,’’ he added.

The positive close for the rupee came on a day when the benchmark Sensex rose 333 points, thus extending its gains to a sixth straight session.

This came on buying in index heavyweights such as HDFC Bank, Larsen & Toubro and Reliance Industries.

Market circles said the buying in HDFC Bank was on account of the RBI withdrawing the ICRR in a phased manner, even as a note from Nuvama said the private sector lender could see inflows of $600 million as the FTSE Russell (which has a global large cap index) is up for a revision on September 15.