The rupee on Tuesday took a breather as it opened 2 paise lower at 68.55 against the US dollar after surging 57 paise to close at an over seven-month high of 68.53 on Monday, mainly driven by sustained foreign fund inflows and narrowing trade deficit.
In the last six trading sessions, the rupee has appreciated by 161 paise.
"We have seen large (dollar) inflows in the last few days hitting the market. USD/INR swap window followed by lower trade deficit added to INR strength," Reuters reported on Monday quoting Paresh Nayar, head of trading desk at First Rand Bank in Mumbai, as saying.
Investors are bullish on the Indian rupee for the first time in nearly a year, a Reuters poll showed last week, as a recent surge in popularity of the country's ruling party is expected to bode well for its alliance in the upcoming national elections.
Nirmal Bang Securities in its daily currency report says, "The USD/INR pair has marked a red candle indicating weakness. It is currently trading below all its important moving averages. If the pair breaks the 68.5 level, it will test 68 levels."
On the global front, Asian shares were trading flat on Tuesday ahead of the a Federal Reserve policy meeting. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, while Japan’s Nikkei average dropped 0.3 per cent and Australian stocks eased 0.1 per cent.
Chinese stocks held tight ranges, with benchmark Shanghai Composite hovering almost flat, the blue-chip CSI 300 declining 0.2 per cent, and the Hang Seng edging 0.1 per cent lower, Reuters reported.
The dollar index against a basket of six major currencies barely moved and was at 96.475, hovering close to a two-week low.