Mumbai: The rupee pared most of its early gains and settled marginally up at 70.83 against the US currency on Thursday due to forex outflows amid growth concerns and uncertainty over the imposition of higher US tariffs on Chinese goods.
A spike in crude oil prices and fears of a further rise in retail inflation also capped the rupee gains.
At the interbank foreign exchange market, the rupee had opened higher at 70.67 against the US dollar and later touched a high of 70.56 largely on the back of losses in the US dollar following the Federal Reserve's decision to keep interest rates unchanged.
However, growing concerns over the nearing deadline of 15 December for setting in of higher US tariffs on Chinese goods eroded the rupee gains.
The rupee finally settled higher by just 2 paise at 70.83 against the American currency, extending its gaining streak for the seventh in a row. The local unit had closed at 70.85 against the US dollar on Wednesday.
Forex traders said market participants traded cautiously ahead of the December 15 deadline, when additional tariffs on Chinese exports to the US are set to kick in.
"The Indian rupee along with other Asian currencies gained on Thursday following a weaker dollar," said V K Sharma, Head - PCG & Capital Market Strategy, HDFC securities.
The US Federal Reserve left interest rates unchanged and signalled it would stay on hold through 2020, keeping it on the sidelines in an election year.
However, volatility for the currency is expected to remain high ahead of the important events that are lined up in the next couple of sessions, Motilal Oswal Financial Services Forex & Bullion Analyst Gaurang Somaiyaa said.
Somaiyaa further said that market participants are waiting for cues on whether the US President will consider imposing import tariff on Chinese goods and that would trigger further move for the rupee.
"We expect the USDINR (Spot) to quote in a wide range of 70.70 and 71.40," Somaiyaa said.
According to HDFC securities' Sharma, the rupee is likely to show some weakness in coming days after gaining a percentage in the last seven sessions due to concerns over retail inflation and IIP data.
Official data released after market hours showed that retail inflation spiked to over three-year high of 5.54 percent in November, mainly on account of higher food prices.
Another set of data showed that industrial production shrank by 3.8 percent in October, mainly due to poor performance by power, mining and manufacturing sectors, signalling a slowdown in the economy.
Foreign institutional investors (FIIs) turned net sellers in the capital market, as they sold shares worth Rs 683.83 crore on net basis on Thursday, according to provisional exchange data.
Brent futures, the global oil benchmark, rose 0.80 percent to $64.23 per barrel.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 percent to 97.18.
The 10-year government bond yield was at 6.78 percent on Thursday.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.8679 and for rupee/euro at 78.5816. The reference rate for rupee/British pound was fixed at 93.1011 and for rupee/100 Japanese yen at 65.17.
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Updated Date: Dec 12, 2019 19:58:00 IST