The rupee on Friday opened one paise lower at 71.85 against the US dollar amid US-China trade truce optimism.
The domestic unit on Thursday gained 28 paise to settle at 71.84 as investor sentiment revived after China and the United States said they will resume trade talks. The rupee has appreciated by 55 paise in the past two sessions.
Market participants, however, said weak domestic equity market, sustained foreign fund outflows and rising crude prices weighed on local currency.
Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out Rs 561.17 crore on Thursday, according to provisional exchange data.
The Indian rupee will not regain ground lost against the dollar in the coming year, according to strategists polled by Reuters, who believe a recent rollback of a surcharge on foreign investments will have no impact on the currency.
After gaining about 2 per cent following a sweeping victory in the general election by the incumbent government late in May, the rupee has lost nearly 6% since a July 5 budget when a surcharge on foreign investments was introduced, the Reuters report added.
"Today, USD/INR pair is quote in the range of 71.70 and 72.30," said Gaurang Somaiya, Research Analyst (Currency) at Motilal Oswal Financial Services (MOFSL).
On the global front, Asian stocks joined global peers and rose on Friday while safe havens such as government bonds and the yen were on the defensive. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4 per cent while the Shanghai Composite Index was up 0.2 per cent and Hong Kong’s Hang Seng rose 0.6 per cent.
In currency market, the dollar stood at 107.070 yen after climbing to a one-month high of 107.235 overnight while he dollar index against a basket of six major currencies was little changed at 98.420. In commodities, oil prices edged higher, said a Reuters report.