The rupee on Tuesday opened 14 paise higher against the US dollar amid steady global shares and rebound in crude oil prices. The domestic unit declined 31 paise to close at 70.87 on Monday amid rising demand for the greenback vis-a-vis other currencies overseas.
Forex traders said globally risk appetite has plunged as US-China trade concerns continue to linger. Besides, selling in domestic equities and unabated foreign fund outflows also weighed on the local unit.
"As we near October 10, any developments on US-China trade front will keep rupee under pressure. Technically, the relative strength index (RSI) indicator is showing USD/INR to be in an over sold zone, so we expect prices to move towards 71.50 in the coming days. This week we have RBI policy and ahead of that rupee will remain on edge, we expect RBI to cut rates by 25 bps," said Rahul Gupta, Currency Research Head at Emkay Global Financial Services.
In the capital market, foreign investors pulled out a net Rs 469.4 crore from Indian equities on Monday, according to exchange data. On the other hand, domestic institutional investors (DIIs) infused a total of Rs 504.69 crore.
In other news, the government on Monday said its borrowing in the current fiscal will be within the budgeted Rs 7.1 trillion, and will stick to the fiscal deficit glide path, but it remained non-committal on the country's maiden overseas sovereign debt plan. READ MORE
"Today, USD/INR pair is expected to quote in the range of 70.50 and 71.20," said Gaurang Somaiya, Research Analyst (Currency) at Motilal Oswal Financial Services (MOFSL).
On the global front, stocks ticked up on Tuesday. Japan's Nikkei rose 0.6 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.11 per cent. US stock futures ESc1 rose 0.16 per cent in Asia, a day after the S&P 500 gained 0.50 per cent, Chinese markets will be shut for a week from Tuesday to mark 70 years since the founding of the People’s Republic of China, Reuters reported.
In the currency market, the US dollar traded near its highest in almost two weeks versus the yen before the release of data that is forecast to show the US manufacturing sector returned to growth. The dollar index against a basket of six major currencies rose 0.03 per cent to 99.402, approaching the highest in more than two years.
In commodities, oil prices rebounded. December Brent crude futures rose 44 cents, or 0.7 per cent to $59.69 a barrel by 07:32 am, while US West Texas Intermediate crude was up 39 cents, or 0.7 per cent, at $54.46 a barrel, the Reuters report added.