Rupee settles nearly flat at 71.24 against US dollar

The rupee pared initial gains to settle nearly flat at 71.24 (provisional) against the US dollar on Wednesday, as market participants await fresh cues from the RBI's monetary policy.

The rupee opened stronger as hopes of a breakthrough in battling the coronavirus epidemic strengthened investor sentiments, forex traders said.

The domestic unit eroded the initial gains as investors are anticipating no change in key interest rate in the RBI policy meet amid surge in inflation, they added.

The Reserve Bank of India (RBI) is scheduled to announce the outcome of its sixth bi-monthly monetary policy statement for 2019-20 on February 6, 2020.

Moreover, rising crude oil prices and strengthening of the American currency in the overseas market also weighed on the domestic unit, while heavy buying in domestic equities and foreign fund inflows supported the local unit.

At the interbank foreign exchange market, the local currency opened at 71.25. During the day, the local unit saw a high of 71.16 and a low of 71.29. The Indian rupee finally settled at 71.24, up 1 paisa from its previous close.

"Rupee gained on hopes of a breakthrough in battling the coronavirus epidemic. Risk appetite back on reports of possible vaccines and treatments for the deadly Wuhan virus," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.

"All eyes will remain on RBI policy stance as markets do not expect any change in interest rate amid surge in inflation. We expect central bank to continue accommodative stance amid temporary spike in inflation," he added.

BSE Sensex settled 353.28 points, or 0.87 per cent, higher at 41,142.66. The broader NSE Nifty rose 109.50 points, or 0.91 per cent, to 12,089.15.