The rupee pared early losses and provisionally settled 4 paise higher at 76.16 against the US dollar on Wednesday tracking gains in the domestic equity market and weakening US dollar.
According to forex traders, border tension with China, foreign fund outflows and concerns over rising Covid-19 cases are weighing on investor sentiment.
The rupee opened weak at 76.21 at the interbank forex market, but recouped the losses and closed at 76.16 against US dollar, higher by 4 paise over its last close.
It had settled at 76.20 against the US dollar on Tuesday.
During the four-hour trading session, the domestic unit witnessed an intra-day high of 76.10 and a low of 76.25.
“The geopolitical tension between India and China has brought back the risk-off mood in investors. We don’t expect the dispute to escalate and both the sides will contain it, till then the market will remain skittish,” Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further said that “any escalation or uncertainty will lead to a sharp bull-run in USD/INR spot. Until 76 level doesn’t break in USD/INR spot, it will continue to remain afloat. The immediate support lies around 75.75, and resistance around 76.50.”
Meanwhile, the domestic equity market was trading on a positive note with the 30-share BSE benchmark Sensex up 152.01 points at 33,757.23 and broader NSE Nifty rising 36.30 points to 9,950.30.
Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 1,478.52 crore on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.68 per cent to USD 41.24 per barrel.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.02 per cent to 96.93.