The rupee slumped to an all-time low of 54.56 against the dollar in afternoon trade on May 16, 2012, even as the Reserve Bank of India broke its silence over the falling rupee, saying it would do its “best possible to curb volatility” in New Delhi, on May 16, 2012.
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| Photo Credit: V.V. Krishnan

The rupee was trading in a narrow range against the American currency in early trade on May 7 and appreciated 4 paise to 83.48 against the U.S. dollar amid a positive trend in domestic equities.

Forex traders said the strength of the American currency in the overseas market, elevated crude oil prices and foreign fund outflows weighed on the local unit and restricted the up move.

At the interbank foreign exchange market, the local unit opened at 83.48 against the greenback, registering a rise of 4 paise from its previous close.

On May 6, the rupee settled 7 paise lower at 83.52 against the U.S. dollar.

“India’s enduringly strong economic fundamentals, coupled with its substantial foreign exchange reserves acting as a safety net, equip the Reserve Bank of India to effectively mitigate any downward pressure on the rupee,” CR Forex Advisors MD Amit Pabari said.

Moreover, substantial foreign direct investment (FDI) inflows are anticipated. The Adani Group is eyeing a $600 million raise via offshore loans, while Belstar Microfinance plans to raise $150 million through an IPO.

“Considering these factors, the downside of the rupee is capped at 83.60. While it is expected to appreciate around 83 to 83.20 in the near-term, with medium-term appreciation ranging between 82.80 to 82.50 levels,” Mr. Pabari said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 105.18, higher by 0.13%.

Brent crude futures, the global oil benchmark, rose 0.29% to $83.57 per barrel.

On the domestic equity market front, the 30-share BSE Sensex rose 19.43 points or 0.03% to 73,914.97 in early trade. The NSE Nifty advanced 19.90 points or 0.09% to 22,462.60 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth ₹2,168.75 crore, according to exchange data.