The rupee on Thursday recovered from record low levels to settle 6 paise higher at 76.28 against the US dollar tracking gains in equity markets and foreign fund inflows. The local unit had settled at an all-time low of 76.34 against the greenback on Wednesday.
Forex traders said the rupee traded in a narrow range as gains in domestic equities supported the local unit amid lingering concerns over coronavirus outbreak in the country.
At the interbank foreign exchange market, the local currency opened higher at 76.11, but witnessed heavy volatility and slid to its all-time intra-day low of 76.55 against the American currency.
The domestic unit later recovered ground to settle at 76.28 against the greenback, up 6 paise over its previous close.
Traders said concerns over the impact of coronavirus outbreak on the domestic as well as the global economy continued to haunt investors.
Meanwhile, the Reserve Bank in its Monetary Policy Report expressed hope that recent monetary and fiscal measures will mitigate the impact of COVID-19 on domestic demand and spur growth once the normalcy is restored.
The RBI observed that it was difficult to make growth projections at this point of time due to the lockdown following the outbreak of COVID-19 but contraction in global outlook could weigh heavily on the growth outlook.
There are more than 15.18 lakh declared cases of coronavirus worldwide. In India, the tally of confirmed coronavirus cases has crossed the 5,700-mark.
"Uncertainty and fragile market sentiments over COVID-19 will continue to keep the rupee under pressure. Further pressure will come from the uptick in crude and surge in the dollar index," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further said, "Also, OTC timings have been trimmed to 10AM-2PM, and it is an illiquid, pessimistic market at this point in time and won't be surprised if 77.50 is breached next week."
The rupee opened stronger, but pared its gains soon and made a fresh all-time low, Devarsh Vakil Head
Advisory HDFC Securities Research said, adding that "dollar selling from exporters near 76.5 and foreign fund buying in domestic equities for the last two days supported rupee recovery through day and rupee managed to close near April 8 levels".
Foreign institutional investors (FIIs) remained net buyers in the capital market, as they bought equity shares worth Rs 1,943.41 crore on Wednesday, according to provisional exchange data.
Meanwhile, equity benchmark Sensex rallied over 1,265 points on Thursday, led by robust buying amid hopes of a second stimulus package from the government. The E barometer ended 1,265.66 points or 4.23 per cent higher at 31,159.62. The NSE Nifty soared 363.15 points, or 4.15 per cent, to 9,111.90.
On a weekly basis, the currency has depreciated by 15 paise.
"The Indian rupee has been under pressure throughout the week, hitting record lows due to the uncertainty in trade created by Covid-19. INR hit a fresh record low of 76.54/US dollar earlier today," said Nish Bhatt, the founder & CEO of Millwood Kane International.
"The unpredictability on the Covid-19 influence means that the INR may come under more pressure in the coming weeks. Most Asian currencies have been falling due to uncertainty over the economic outlook, with near-zero exports due to the outbreak of coronavirus," Bhatt said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.06 per cent to 100.05.
Global crude oil benchmark Brent rose 3.75 per cent to USD 34.07 per barrel amid concerns over global growth. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 76.0867 and for rupee/euro at 82.4699. The reference rate for rupee/British pound was fixed at 93.5724 and for rupee/100 Japanese yen at 69.88.
The forex market will remain closed on April 10 on account of Good Friday holiday.