Rupee pares gains to close marginally down on forex outflows

The rupee pared initial gains to close marginally down by 2 paise at 74.26 against the US dollar on Wednesday amid sustained foreign fund outflows and heavy selling in domestic equities.

Forex traders said the Indian rupee failed to find a foothold as there are still concerns over the impact of the coronavirus pandemic on the global as well as domestic economy.

At the interbank foreign exchange market, the local currency opened higher at 73.98. During the day, it shuttled between a high of 73.92 and a low of 74.42 against the greenback.

The domestic unit finally finished at 74.26, down 2 paise over its previous close.

"Rupee fell against the US dollar amidst continued meltdown in the equity markets and sustained foreign fund outflows. Dollar showed some strength as investors pursued most liquid currency as concerns about economic shutdowns from the coronavirus continued to dent risk appetite," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

According to provisional market data, foreign investors pulled out Rs 5,085.35 crore on a net basis from capital markets on Wednesday.

Somaiyaa further said that "continuous efforts by major central banks to provide liquidity in the system and stabilize the economy is increasing the volatility in the market. We expect the rupee (Spot) to trade in range of 74 and 74.60."