The rupee pared initial gains to settle lower by 2 paise at 81.80 (provisional) against the U.S. dollar on May 8, tracking a recovery in crude oil prices.
Forex traders said the rupee consolidated in a narrow range as the gains from weak American currency and positive domestic equities were negated by a recovery in crude oil prices.
At the interbank foreign exchange, the local unit opened on a positive note at 81.76 but pared early gains to settle 2 paise lower at 81.80 against the U.S. dollar despite a firm trend in domestic equities.
During the day, the rupee touched a high of 81.70 and a low of 81.82 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.07% to 101.13.
Brent crude futures, the global oil benchmark, advanced 1.93% to $76.75 per barrel.
The rupee depreciated today on a sharp recovery in crude oil prices. However, the weak U.S. Dollar and positive domestic equities cushioned the downside, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
The U.S. Dollar declined amid renewed concerns over the banking sector.
"We expect the rupee to trade with a slight positive bias on the rise in risk appetite in global markets and the weak U.S. Dollar. FIIs have remained net buyers over the past seven consecutive sessions.
"However, recovery in crude oil prices may cap sharp upside. Investors may remain cautious ahead of inflation data from India and the U.S. later this week. We expect USD/INR spot to trade in between 81.20 to 82.20 in the near term," Choudhary said.
In the domestic equity market, the 30-share BSE Sensex advanced 709.96 points or 1.16% to close at 61,764.25. The broader NSE Nifty rose 195.40 points or 1.08% to settle at 18,264.40.
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Friday, as they purchased shares worth ₹777.68 crore, according to exchange data.
Meanwhile, India's foreign exchange reserves jumped $4.532 billion to $588.78 billion for the week ended April 28, the Reserve Bank of India said on Friday.
The overall reserves had dropped $2.164 billion to $584.248 billion in the previous week.
