The Indian rupee ended its four-day decline on Tuesday, posting modest gains against the US dollar, though upside was capped by persistent dollar demand from importers and hedging activity, traders said.
The rupee closed slightly stronger at around 83.30 per dollar, recovering from recent losses that had pushed the currency closer to record lows. Early support came from a softer US dollar index and mild inflows into domestic equities, which helped the local currency regain some ground.
However, market participants noted that gains were limited as importers stepped up dollar purchases to hedge upcoming payments, particularly from the oil and electronics sectors. These flows absorbed much of the selling pressure on the greenback, preventing a sharper appreciation in the rupee.
Traders also remained cautious ahead of key global cues, including US economic data and signals from the Federal Reserve on the future path of interest rates. Any indication that US rates may stay higher for longer could renew pressure on emerging market currencies, including the rupee.
Meanwhile, the Reserve Bank of India was seen maintaining a watchful stance in the foreign exchange market. While there was no strong evidence of active intervention during the session, dealers said the central bank is likely to smooth excessive volatility to prevent abrupt movements in the currency.
Looking ahead, analysts expect the rupee to trade in a narrow range in the near term, with importer demand on one side and intermittent foreign inflows on the other. Global risk sentiment, crude oil prices, and movements in the dollar index are likely to remain the key drivers for the Indian currency in the coming sessions.
