New Delhi: The rupee appreciated by 10 paise to settle at 83.76 against the US dollar on Tuesday, supported by a firm trend in the domestic equities and foreign fund inflows.
Forex traders investors are awaiting cues from the US Federal Reserve's policy decision this week.
Moreover, the decline in wholesale inflation to a four-month-low, strong domestic equities and foreign fund inflows aided the domestic currency, they added.
At the interbank foreign exchange market, the rupee opened at 83.87, and traded in the range of 83-70 to 83.87 during the day.
It settled for the day at 83.76 against the US dollar, up 10 paise from its previous close of 83.86.
"The rupee gained on Tuesday on positive domestic markets and weakness in the US dollar index. Domestic markets are trading near record highs," Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.
India's WPI inflation cooled off to 1.31 per cent in August, as against 2.04 per cent in July.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was up 0.10 per cent to 100.86.
Brent crude, the international benchmark, advanced 1.02 per cent to USD 73.49 per barrel in futures trade.
In the domestic equity market, Sensex climbed 90.88 points to settle at a fresh all-time high of 83,079.66, while the Nifty rose 34.80 points to hit its record of 25,418.55.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Tuesday, as they purchased shares worth Rs 482.69 crore, according to exchange data.
"We expect the rupee to trade with a slight positive bias on firm tone in the domestic markets. Weak US dollar may also support the rupee," Choudhary said, adding that USD-INR spot price is expected to trade in a range of Rs 83.60-83.95.
"While Asian currencies being lifted by heightened odds of a deeper rate cut by the Fed on Wednesday, the rupee also finally took the strengthening direction, while pinned down by persistent dollar demand from local importers and likely absorption of inflows by the Reserve Bank of India," said Maneesh Sharma, AVP - Commodities & Currencies, Anand Rathi Shares and Stock Brokers.
Sharma further said heavy intervention by the Reserve Bank of India (RBI) since last month has resulted in India's foreign exchange reserves rising to a record high of USD 689.2 billion as of September 6, according to central bank data.
Also declining crude oil prices and inflows from foreign investors remain a positive trigger for rupee in near-term helping it to trade in the range of 83.60 – 83.80 per dollar.