The rupee opened on a flat note against the US dollar in early trade on Tuesday, weighed down by a muted trend in domestic equities and the strength of the American currency in overseas markets.
Forex traders said the US dollar strengthened due to increased demand from oil importers and stronger-than-expected economic data from the US. Moreover, rising crude oil prices also weighed on the local unit.
At the interbank foreign exchange market, the local unit moved in a narrow range. It opened at 83.49 against the American currency and touched 83.50 in initial trade.
On Monday, the rupee settled for the day lower by 10 paise at 83.50 against the US dollar.
The Reserve Bank of India's positive economic outlook, with solid growth and unchanged inflation projections, suggests that there is less room for any early cuts amid prospects of rising inflation. This is likely to benefit the rupee from a favourable interest rate differential, said CR Forex Advisors MD Amit Pabari.
Further, Foreign Institutional Investors (FII) have resumed their buying. FIIs were net buyers in the capital markets on Monday, as they purchased shares worth Rs 2,572.38 crore, according to exchange data.
Moreover, anticipated inflows such as Reliance Infrastructure raising USD 350 million, SpiceJet planning to raise USD 250 million, and Clix Capital aiming to raise USD 600 million are likely to benefit the rupee, Pabari said.
Given these factors, the rupee is expected to swing within a range of 82.90 to 83.70, he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 105.12, lower by 0.02 per cent.
Brent crude futures, the global oil benchmark, fell 0.20 per cent to USD 81.47 per barrel.
On the domestic equity market, the 30-share BSE Sensex was trading 155.45 points, or 0.20 per cent lower at 76,334.63 points. The broader NSE Nifty was down 33.25 points, or 0.14 per cent, to 23,225.95 points.
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