The rupee gained 18 paise to close at 81.56 (provisional) against the US dollar on Wednesday, driven by foreign inflows from bonds selling and overall weakness in crude oil prices.
However, a flattened trend in local equities dampened investor optimism and restrained the rupee's strong appreciation, according to traders.
The local currency against the dollar started the day at 81.73 on the interbank foreign exchange market and fluctuated between an intraday high of 81.52 and a low of 81.82.
It ultimately closed at 81.56 (provisional), up 18 pence from the previous closing.
On Tuesday, the rupee settled at 81.74 against the US dollar.
The dollar also gained on safe-haven appeal as the World Bank trimmed the 2023 global GDP forecast to 1.7 per cent citing the Russia-Ukraine conflict, inflation and higher interest rates as the main reasons.
The dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.06 per cent to 103.30.
Benchmark Brent crude futures for the world's oil increased 0.42 percent to USD 80.44 a barrel.
The 30-share BSE Sensex dipped 9.98 points, or 0.02 percent, to close at 60,105.50 on the domestic equities market, while the larger NSE Nifty fell 18.45 points, or 0.1%, to close at 17,895.70.
According to exchange data, Foreign Institutional Investors (FIIs) sold shares worth Rs 2,109.34 crore on Tuesday, making them net sellers in the capital market.
With inputs from Agencies.
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