The Indian rupee moved up by 13 paise to close at 71.25 against the US dollar on Tuesday as forex market participants gauged improved sentiment in global markets amid efforts to contain deadly coronavirus. The Indian currency was also supported by Brent crude prices at lower levels and foreign fund inflows into domestic equities.
At the interbank foreign exchange market, the local currency opened at 71.24. During the day, the local unit saw a high of 71.09 and a low of 71.29. The Indian rupee finally settled at 71.25, up 13 paise over its previous close.
Analysts said that after a lacklustre budget last week investors are focussing on other market moving factors like upcoming RBI policy and quarterly corporate results.
They added that efforts to contain the deadly coronavirus in China also helped improve investor sentiment.
The Reserve Bank of India's monetary policy outcome could be the next trigger for the domestic unit, as its commentary on inflation and growth forecast will be followed closely by the investors, they added.
The RBI is scheduled to announce the outcome of its sixth bi-monthly monetary policy statement for 2019-20 on February 6.
Crude prices have seen some moderation in the past few sessions over demand slump amid rising coronavirus cases in China and other regions.
Global crude benchmark Brent was trading at USD 54.86 per barrel.
Meanwhile, foreign institutional investors bought equities worth Rs 366.21 crore on a net basis on Tuesday, according to provisional exchange data.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.08 per cent to 97.87.
The 10-year Indian government bond yield was at 6.51 per cent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.5803 and for rupee/euro at 79.3301. The reference rate for rupee/British pound was fixed at 94.1954 and for rupee/100 Japanese yen at 65.96.
"Globally equities witnessed inflow and lower crude prices supported the rupee in the domestic market. Crude prices which are trading at 4-month lows can keep rupee strong," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.
Trivedi, however, noted that "crude price can surprise as OPEC+ is considering production cut of around 500,000 bpd and even further which can support the crude oil prices".
On the equity front, the BSE benchmark closed at 40,789.38, up 2.30 per cent or 917.07 points. This was the biggest single-day rise for the Sensex since September 23, 2019. The broader NSE Nifty settled at 11,979.65, surging 2.32 per cent or 271.75 points -- gaining the most in a single day in over four months.
"Rupee continued to quote in a broad range of 70.70 and 72.20 for the last few months despite volatility in global markets on back of uncertainty in the Middle East, trade war concerns between US and China and lately the outbreak of Corona virus in China," according to the Commodity and Currency Canvas by Motilal Oswal Financial Services.
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