The rupee spurted by 33 paise to close at a more than two-week high of 72.46 against the U.S. dollar on Monday, continuing its gaining streak for the fourth session in a row on the back of forex inflows.
The rupee opened strong at 72.71 at the interbank forex market despite a lacklustre trend in the domestic equity market and gains in the dollar index.
The dollar index recovered from a week's low on Monday on a rise in Treasury yields on inflation worries ahead of the Federal Reserve's meeting.
Analysts said the forex market is likely to remain volatile ahead of the outcome of the Fed meeting.
The local unit witnessed an intra-day high of 72.40 and a low of 72.75 on Monday. It finally ended at 72.46, registering a rise of 33 paise over its previous close. Since March 9, the rupee has gained over 1%.
"Indian rupee started the week on a front foot following dollar inflows. Even after weaker domestic equities and a stronger dollar index, rupee outperformed among Asian currencies following strong foreign inflows in the primary equity market," said Dilip Parmar, Research Analyst, HDFC Securities.
The forex market is expected to remain volatile ahead of Wednesday's Federal Open Market Committee (FOMC) meet outcome, he stated.
"Though, there is no change in interest rate expected, the focus will remain on updated dots and any comments on rising real yields," he said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, climbed 0.12% to 91.78. Meanwhile, Brent crude futures, the global oil benchmark, fell 0.01% to $69.21 per barrel. "Market participants remain cautious ahead of the important FOMC policy statement that will be released later this week. The expectation is that the central bank could maintain a status quo but economic projections and what stance the central bank holds on the economy is likely to impact the greenback," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Mr. Somaiyaa further noted that "we expect the USDINR (Spot) to trade sideways with a negative bias and quote in the range of 72.20 and 72.80." On the domestic equity market front, the BSE Sensex ended 397 points or 0.78% lower at 50,395.08, while the broader NSE Nifty declined 101.45 points or 0.67% to 14,929.50. Foreign institutional investors were net sellers in the capital market as they offloaded shares worth ₹942.60 crore on Friday, according to exchange data.
