The rupee appreciated by 25 paise to settle at 75.66 against the US dollar on Tuesday as reports of initial success in COVID-19 vaccine trials boosted investor sentiment world over. Forex traders said besides the encouraging results in a COVID-19 vaccine trial, gains in domestic equities and a weak greenback in the overseas market supported the local unit.
At the interbank foreign exchange, the rupee opened higher at 75.71 against the previous close of 75.91. The unit gained further ground to settle at 75.66 against the American currency, registering a rise of 25 paise.
During the trading session, the domestic unit saw an intra-day high of 75.63 and a low of 75.79 against the greenback.
In a significant development towards developing a vaccine for the coronavirus, an American biotechnology company on Monday said its initial vaccine tests in people have shown promising results and can stimulate an immune response against the virus.
Globally, over 48.05 lakh people have been infected by the virus and over 3.18 lakh have died.
In India, the death toll due to COVID-19 rose to 3,163 and the number of cases climbed to over 1.01 lakh, according to the health ministry.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.16 per cent down at 99.50.
Forex traders further noted that the appreciation in the rupee might be a temporary phenomenon as domestic concerns surrounding the coronavirus can weigh on the local unit going forward.
"Today’s rise could be a temporary phenomenon for the rupee, especially since global and domestic equities have reacted positively to the potential virus vaccine. However, the rupee’s risk of depreciation still remains, as domestic concerns surrounding the virus will take the forefront," said Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking.
Sachdeva further said that "COVID-19 cases in India have risen exponentially, and fiscal deficit concerns surrounding the stimulus package will weigh on the appetite going forward".
According to Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services, market participants will be keeping an eye on housing numbers and Fed Chairman testimony to gauge a view for the dollar. "For the next couple of sessions we expect the rupee (Spot) to quote in the range of 75.20 and 76.20," he suggested.
Meanwhile, foreign institutional investors were net sellers in the capital market, as they offloaded equity shares worth Rs 2,512.82 crore on Monday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 0.37 per cent to USD 34.68 per barrel.
Benchmark equity indices broke the three-session losing streak on Tuesday, tracking enthusiasm in global markets over a potential COVID-19 vaccine.
After rallying over 700 points in a volatile session, the 30-share BSE Sensex finished 167.19 points or 0.56 per cent higher at 30,196.17. The NSE Nifty advanced 55.85 points or 0.63 per cent to end at 8,879.10.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.9345 and for rupee/euro at 82.1910. The reference rate for rupee/British pound was fixed at 91.9542 and for rupee/100 Japanese yen at 70.84.