The rupee pared all its initial gains to settle lower by 3 paise at 81.82 (provisional) against the US currency on Friday amid a strong greenback overseas.
However, the strong sentiment in the domestic equities market restricted the depreciating bias in the rupee, forex traders said.
At the interbank foreign exchange, the domestic unit opened at 81.77 against the dollar and finally closed at 81.82 (provisional), down 3 paise from its previous close.
During the day, the rupee witnessed a high of 81.72 and a low of 81.85 against the greenback.
On Thursday, the rupee closed at 81.79 against the US currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.51 per cent to 102.02.
Brent crude futures, the global oil benchmark, advanced 0.45 per cent to USD 78.72 per barrel.
The rupee depreciated on a strong US Dollar and a recovery in crude oil prices. However, positive domestic equities and FII inflows cushioned the downside, Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas said.
The US Dollar strengthened on strong earnings by IT companies and as US inflation data released on Thursday were elevated, raising expectations of a hawkish Federal Open Market Committee (FOMC).
"We expect the rupee to trade with a slight positive bias on the rise in risk appetite in global markets and fresh inflows from foreign investors. However, a strong US Dollar may prevent a sharp upside in the rupee," Choudhary said.
Traders may remain cautious ahead of India's fiscal deficit and core PCE deflator from the US, which is the preferred gauge of inflation used by the US Federal Reserve, Choudhary said, adding that "We expect USD/INR spot to trade in between 81.30 to 82.20 in the near-term".
Share market
The markets on Friday closed in green for the third consecutive day with Sensex up by 463.06 points at 61,112.44, Nifty was at 18,052.70 with a gain of 137.65 points. Wipro, Nestle, ITC, LT and Reliance were among the gainers whereas Mahindra and Mahindra, HDFC, HUL, Asian Paints and Bajaj Finserv were among the losers.
FIIs
Foreign Institutional Investors (FIIs) were net buyers in the capital market on Thursday as they purchased shares worth Rs 1,652.95 crore, according to exchange data.
With input from PTI
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