The rupee on Tuesday made a smart rebound, gaining 15 paise to end at 66.73 on fresh bout of dollar selling by exporters and banks amid weak overseas sentiment.
The domestic currency appreciated to an intraday high of 66.67, primarily due to increased foreign inflows into equities and debt, dealers said.
Weakness in the dollar against other currencies overseas on an unexpected fall in the US manufacturing index also made the rupee stronger, a forex dealer said.
The rupee resumed at 66.80 from Monday’s close of 66.88 and moved in a narrow range with a positive bias throughout the day before ending at 66.73, a gain of 15 paise, or 0.24%.
The rupee tracked gains in most Asian and other emerging market currencies, which closed higher because of weakness in the greenback. South Korean won, South African rand, Russian ruble, Malaysian ringgit and Indonesian rupiah closed higher by 0.3-1.1% than their previous close.
Traders were cautious ahead of the release of minutes of the Monetary Policy Committee meeting. Data from China on industrial production, retail sales and gross domestic product are all due on Wednesday, and this had some bearing on the sentiment.
Meanwhile, the 10-year benchmark bond closed at 6.72% on Tuesday, 2 basis points lower than the previous close. So far this year, FIIs have been sellers of bonds, having net sold bonds worth $887 million. However, they have net bought equities worth $7.4 billion over the same period.
Dealers said if the foreign inflows seen on Tuesday sustained for some more time, the rupee could further strengthen. Dollars coming in due to these investments are mostly being absorbed by the RBI in order to cover for the redemption of FCNR(B) deposits.