The rupee appreciated 13 paise to close at 82.83 (provisional) against the U.S. dollar on February 22, tracking the weakness of the American currency in the overseas market and positive domestic equities.
Forex traders said elevated crude oil prices weighed on the local unit and restricted a sharp uptick.
At the interbank foreign exchange, the local unit opened at 82.94 against the greenback. It hit an intraday high of 82.83 during the day.
The domestic unit finally settled at 82.83 (provisional) against the dollar, higher by 13 paise from its previous close of 82.96.
The Indian rupee appreciated on February 22 on weak U.S. dollar and mixed-to-positive domestic markets, said Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas.
However, a surge in crude oil prices capped sharp gains. The U.S. dollar declined on rise in risk appetite in global markets and positive European markets ahead of PMI data from Eurozone and Germany.
Analysts attributed the retreating dollar index to the U.S. Federal Reserve's minutes that reflected policy makers' cautious approach, ebbing the possibility of interest rate cuts in the immediate future.
"The Federal Open Market Committee (FOMC) minutes released on Wednesday were slightly hawkish," Mr. Choudhary said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.31% lower at 103.68.
Brent crude futures, the global oil benchmark, rose 0.37% to $83.34 per barrel.
"We expect the rupee to trade with a slight positive bias on the weak tone in the U.S. dollar and positive global markets. However, rising global crude oil prices and geopolitical tension in the Middle East may limit the gains in the rupee.
"Traders may watch out for manufacturing and services PMI, weekly unemployment claims and existing home sales data from the U.S. USDINR spot price is expected to trade in a range of ₹82.60 to ₹83.10," Mr. Choudhary added.
On the domestic equity market front, the Sensex advanced 535.15 points, or 0.74%, to 73,158.24. The Nifty rose 162.40 points, or 0.74%, to hit an all-time high of 22,217.45.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on February 21 as they purchased shares worth ₹284.66 crore, according to exchange data.
