The rupee pared its initial losses and settled 2 paise higher to close at 79.55 (provisional) against the US dollar on Monday, tracking positive domestic equities and foreign fund inflows.
At the interbank forex market, the local unit opened at 79.66 against the greenback. It witnessed an intra-day high of 79.47 and a low of 79.72 during the session.
It finally ended at 79.55, up 2 paise from its previous close of 79.57.
The dollar index, which measures the greenback's strength against a basket of six currencies, fell 0.89 per cent to 108.03.
Brent crude futures, the global oil benchmark, advanced 1.04 per cent to USD 93.81 per barrel.
"Rupee continued to appreciate as the dollar weakened against its major crosses. Market participants remained cautious also ahead of inflation and IIP numbers that will be released on the domestic front," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Somaiya further said the expectation is that inflation could remain unchanged compared to the previous month.
"Gains in the currency were led also by a rally in domestic equities. Euro did witness volatility but hawkish central bank statements kept the currency supported at lower levels. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.40 and 80.05," Somaiya said.
On the domestic equity market front, the BSE Sensex ended 321.99 points or 0.54 per cent higher at 60,115.13, while the broader NSE Nifty gained 103.00 points or 0.58 per cent to 17,936.35.
Foreign institutional investors were net buyers in the capital market on Friday as they purchased shares worth Rs 2,132.42 crore, as per exchange data.
Meanwhile, the country's foreign exchange reserves declined by USD 3.007 billion to USD 561.046 billion in the week ended August 26, the Reserve Bank of India (RBI) data showed.
(To receive our E-paper on whatsapp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)
