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The rupee appreciated by 15 paise to 81.65 against the US dollar in early trade on Thursday tracking weakness in the American currency overseas.
Forex traders said significant foreign fund inflows and crude prices below $75 a barrel also supported the local unit.
At the interbank foreign exchange, the domestic unit opened higher at 81.68 against the dollar and then recovered to 81.65, registering a gain of 15 paise from its previous close.
On Wednesday, the rupee had closed at 81.80 against the American currency.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.24% to 101.09.
“The Fed hiked rates by 25 bps to 5.00-5.25 per cent in line with market expectations. In its statement, the FOMC removed its mention of future interest rate hikes, hinting at a possible pause in June , which was mainly weighted on DXY, said Amit Pabri, Managing Director, CR Forex Advisors.
Global oil benchmark Brent crude futures rose 0.57% to $72.74 a barrel.
“Widespread weakness in USD and falling crude prices continued to help local currency trade higher. However, RBI continued to hold additional dollars to avoid volatility and build forex reserves. FIIs remained positive for May as India continues to be in a stronger position than its peers, which is also weighing on dollar demand,” Mr. Pabari said.
Foreign institutional investors (FIIs) were net buyers in the capital market on Wednesday as they bought shares worth ₹1,338.00 crore, according to exchange data.
Mr. Pabri further added, “Overall, the rupee is expected to trade in a narrow range of 81.70-82.30 as geopolitical tensions are increasing volatility.” In the domestic equity market, the 30-share BSE Sensex advanced 76.42 points, or 0.12%, to 61,269.72. The broader NSE Nifty rose 29.30 points, or 0.16%, to 18,119.15.