The rupee gained 10 paise to settle at 72.87 (provisional) against the US dollar on Tuesday on the back of sustained foreign fund inflows and weak American currency.
However, surging crude prices and subdued domestic equity market hit the rupee sentiment and restricted the gain, traders said.
At the Interbank Foreign Exchange (forex), the local unit opened sharply higher at 72.87 against the dollar. During the session, the unit touched a high of 72.85 and a low of 72.92. It finally settled at 72.87, registering a rise of 10 paise against the greenback.
In the previous session, the rupee had slipped 4 paise to settle at 72.97 against the US dollar.
"Indian rupee gained strength amid weakness in Dollar and rise in risk appetite in the global markets. Market sentiments improved on the expectation that stimulus packages, easy monetary policies and progress in vaccination programme would boost economic growth.
"Further, consistent FII inflows supported Rupee. However, the sharp upside was prevented on a surge in crude oil prices. Rupee may trade in the range of 72.65 to 73.30 in next couple of sessions," Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas said.
Foreign portfolio investors (FPIs) were net buyers in the capital market as they purchased shares worth Rs 1,876.60 crore on Monday, as per exchange data.
The dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.42 per cent to 90.57.
On the domestic equity market front, the BSE Sensex ended 19.69 points or 0.04 per cent lower at 51,329.08, while the broader NSE Nifty slipped 6.50 points or 0.04 per cent to 15,109.30.
Meanwhile, the global oil benchmark Brent crude was trading 0.50 per cent higher at USD 60.86 per barrel.
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