The rupee surged by 33 paise to close at 68.41 against the dollar on Wednesday, amid weakness in the greenback against key rivals overseas even as oil prices firmed up on supply concerns. That marked the third straight session of gain for the rupee, a period in which it has strengthened by 89 paise against the US currency.
At the Interbank Foreign Exchange, the rupee opened at 68.72 per dollar and advanced to a high of 68.37 during the session. It finally settled at 68.41, up 33 paise against its previous close of 68.74.
Heavy foreign fund outflows, rising crude oil prices and selling in domestic equities capped the gains for the rupee, said forex dealers.
"Oil prices rose for a fourth day, pushing Brent towards a nearly five-month high of USD 70 a barrel as support from OPEC-led supply cuts and US sanctions overshadowed a report showing an unexpected rise in US inventories," said VK Sharma, head PCG and capital markets strategy, HDFC Securities.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,040.48 crore Wednesday, as per the provisional data.
Brent crude futures, the global oil benchmark, rose 0.48 per cent to trade at $69.70 per barrel amid OPEC-led supply cuts.
The dollar index, which gauges the greenback's strength against a basket of six currencies, tripped 0.37 per cent to 97.00.
Forex traders noted that the RBI is likely to adopt a dovish policy stance Thursday, which could restrict significant appreciation for the rupee. Below-normal monsoon forecast by private firm Skymet could also weigh on the domestic unit, they added.
Snapping their four-session rising streak, benchmark indices closed in the red Wednesday as investors took money off the table following forecast of below-normal monsoon this year.
The 30-share Sensex settled 179.53 points, or 0.46 per cent lower at 38,877.12, while, the broader NSE Nifty too pared early gains and ended 69.25 points, or 0.59 per cent, down at 11,643.95.
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