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The rupee consolidated in a narrow range and depreciated by 2 paise to close at 83.04 (provisional) against the U.S. dollar on Thursday, tracking a strong American currency and elevated crude oil prices in the international market.
Forex traders said the Indian currency depreciated as foreign fund outflows weighed on the rupee. However, positive domestic markets cushioned the downside.
At the interbank foreign exchange market, the local unit opened at 83.00 and finally settled at 83.04 (provisional) against the dollar, down by 2 paise from its previous close.
During the day, the rupee witnessed a range-bound movement. It saw an intra-day high of 82.99 and a low of 83.04 against the American currency.
On Wednesday, the rupee appreciated 6 paise to close at 83.02 against the U.S. dollar.
"We expect the rupee to trade with a slight positive bias on rise in risk appetite in global markets and a negative tone in the U.S. dollar. Overnight decline in global crude oil prices and better than expected trade balance may further support rupee," said Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas.
However, concerns over FII outflows may cap sharp upside.
"Any recovery in the U.S. dollar may also weigh on the rupee at higher levels. Traders may take cues from retail sales, industrial production, Empire State Manufacturing Index and weekly unemployment claims data from the U.S. USD-INR spot price is expected to trade in a range of ₹82.80 to ₹83.20," Mr. Choudhary added.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was 0.10% down at 104.61.
Brent crude futures, the global oil benchmark, was trading 0.40% lower to $81.27 per barrel.
On the domestic equity market front, Sensex advanced 227.55 points, or 0.32%, to settle at 72,050.38 points. The Nifty fell 70.70 points, or 0.32%, to 21,910.75 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday as they sold shares worth ₹3,929.60 crore, according to exchange data.
On the domestic macroeconomic front, the country's exports increased 3.12% on-year to $36.92 billion in January, according to the data released by the government on Thursday.
Imports rose by about 3% year-on-year to $54.41 billion in January this year and trade deficit stood at $17.49 billion.
