The rupee edged higher by 10 paise to close at 75.63 against the US dollar on Tuesday, fueled by a buoyant domestic equity markets and gains in some Asian currencies. Forex traders said the rupee traded in a narrow range as positive domestic equities supported the local unit, while sustained foreign fund outflows and concerns over coronavirus outbreak weighed on the local unit. On Tuesday, the rupee opened at 75.53, and moved in a range of 75.50-75.72 against the US dollar before settling at 75.63.
"Other Asian currencies have also started with gains against the US Dollar this Tuesday morning amid risk appetite returned to the market as many countries planned to ease the restrictions on the lockdown enforced due to the COVID-19 pandemic," Reliance Securities said in a note.
However, some analysts also suggest that the domestic currency will stay vulnerable if tensions between the US and China continue to escalate.
"Tensions have escalated between China and US as latter has accused the former of suppressing information on COVID outbreak, that originated in China and has since spread around the globe. US has threatened to impose higher tariffs to penalise China and even warned of stringent action, said Anindya Banerjee, DVP-currency derivatives and interest rate derivatives at Kotak Securities.
As long as this kind of rhetoric continues to dominate the headlines, Asian currencies will depreciate against the US dollar and that the rupee cannot stay immune, he added.