The rupee recovered from its all-time low level and witnessed a range-bound trade against the US dollar in early hours on Thursday, as investors remained cautious ahead of the US Fed meeting outcome later this week.
Forex traders said RBI interventions will keep the USD/INR pair between 83.80 and 84.35. Moreover, the US Federal Reserve monetary policy and officials' comments will be in focus to derive further momentum.
At the interbank foreign exchange, the rupee opened at 84.26 against the greenback, registering a rise of 5 paise over its previous close.
On Wednesday, the rupee depreciated 22 paise to close at an all-time low of 84.31 against the US dollar.
"The Indian rupee fell to its lowest (level) on Wednesday and is expected to continue with its fall as the Reserve Bank of India (RBI) allows a weaker rupee with FPIs (foreign portfolio investors) continuing their selling mode in equities," Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said.
RBI protected the rupee for some time but left the protection as pressure on buying dollars was immense after a rise in the dollar index and an increase in US yields, Bhansali added.
Forex traders said the rupee was trading in a narrow range as persistent foreign fund outflows, a muted trend in domestic equities and the strength of the American currency in the overseas market, dented investor sentiments.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.10 per cent lower at 104.98.
Brent crude, the global oil benchmark, rose 0.79 per cent to USD 75.51 per barrel in futures trade.
On the domestic equity market front, Sensex declined 429.83 points, or 0.53 per cent, to 79,948.30 points. The Nifty fell 143.25 points, or 0.59 per cent, to 24,340.80 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, as they offloaded shares worth Rs 4,445.59 crore, according to exchange data.
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