In early trade on Thursday, the rupee followed a down trend in domestic equities and was trading in a constrained range against the US dollar.
Due to the aggressive tone of the US Fed policy statement, according to forex traders, investors opted to remain passive.
At the interbank foreign exchange, the local unit started out weakly versus the dollar at 81.81, then declined further to 81.86, losing 6 paise from its previous close. Later, it cut its losses and was trading level against the dollar at 81.80.
On Wednesday, the rupee appreciated 8 paise to close at 81.80 against the dollar after Finance Minister Nirmala Sitharaman presented the Union Budget for 2023-24.
"The budget ticked most boxes. Government managed to strike a balance between maintaining capex thrust and attaining fiscal consolidation," IFA Global Research Academy said in a research note.
Budgeted capex at Rs 10 lakh crore is 33 per cent higher year-on-year. Fiscal deficit meanwhile has been budgeted at 5.9 per cent of GDP (Rs 17.8 lakh crore) for FY24, in line with most market estimates.
"Estimates for GDP growth, tax buoyancy, disinvestment look reasonable," the research note said, adding that "the rupee is likely to trade in a 81.55-81.90 range intra-day with strengthening bias".
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.28 per cent to 100.93, after the US Fed hiked the Fed funds rate along expected lines by 25 basis points to 4.50-4.75 per cent.
"The Fed acknowledged that inflation had eased somewhat, but continued to remain elevated. It reiterated that ongoing rate increase would be appropriate," the note said.
Brent crude futures rose 0.77 percent to USD 83.48 per barrel, the global oil benchmark.
The 30-share BSE Sensex was down 24.67 points, or 0.04 percent, at 59,683.41 on the domestic equity market. The NSE Nifty, which is more inclusive, dropped 31.50 points or 0.18 percent to 17,584.80.
According to exchange data, Foreign Institutional Investors (FIIs) changed from net sellers to purchasers on Wednesday, buying shares worth Rs 1,785.21 crore.
With inputs from Agencies.
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