Rupee falls 4 paise to close at 83.97 against US dollar

Mumbai, Aug 28: The rupee depreciated 4 paise to close at 83.97 against the American currency on Wednesday, amidst strong dollar demand from importers, particularly oil companies.

Forex traders said a positive trend in domestic equities, foreign fund inflows and overnight decline in crude oil prices cushioned the downside.

At the interbank foreign exchange market, the local unit opened at 83.94 and touched an intra-day low of 83.97 against the US dollar.

The domestic currency traded in a narrow range before settling at 83.97, lower by 4 paise from its previous close. On Tuesday, the rupee depreciated by 6 paise to close at 83.93 against the American currency.

"We expect the rupee to trade with a slight negative bias on recovery in the US dollar and month-end dollar demand from oil marketing companies (OMCs) and importers," said Anuj Choudhary -- Research Analyst at Sharekhan by BNP Paribas.

Choudhary further noted that rise in global risk sentiments amid dovish Fed speak and rising expectations of a rate cut by the US Fed in September may support the rupee.

"Traders may remain cautious ahead of US GDP and core personal consumption expenditures (PCE) data from the US this week.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.36 per cent higher at 100.91.

"Rupee dipped amidst strong dollar demand from importers particularly oil companies as RBI kept its protection at 83.97 level not allowing 84 level to be touched. Importers need to keep covering every dip of 10-20 paise we get," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

Brent crude, the global oil benchmark, declined 0.93 per cent to USD 78.81 per barrel.

On the domestic equity market front, Sensex rose 73.80 points, or 0.09 per cent, to close at 81,785.56 points. The Nifty closed 34.60 points, or 0.14 per cent, up at 25,052.35 points.

Foreign Institutional Investors (FIIs) turned net sellers in the capital markets on Wednesday, offloading shares worth Rs 1,347.53 crore, according to exchange data.

"There has been constant buying by FPIs who are selling stakes in different companies due to high valuations. Rupee is expected in a range of 83.85 to 84.05 tomorrow," Bhansali said.