The rupee stayed range-bound and settled 2 paise higher at 83.26 against the US dollar on Thursday as the American currency retreated from its elevated levels after the US Federal Reserve was a bit dovish in its policy meeting.
Forex traders said the local unit got support from positive domestic equity markets and risk-on sentiments.
The US Federal Reserve kept interest rates on hold and its Chairman Jerome Powell looked content with the economy's soft landing. Following the decision, the dollar index softened, and the 10-year bond yield fell to 4.70.
At the interbank foreign exchange, the rupee opened at 83.23 and finally settled at 83.26 against the greenback, registering a gain of 2 paise from its previous close.
During the day, the rupee witnessed range-bound trade reaching the peak of 83.19 and hitting the lowest level of 83.27 against the American currency.
On Wednesday, the rupee settled at 83.28 against the US dollar and had hit an all-time low level of 83.35 against the American currency during intra-day.
"After Fed dovishness, US dollar was still well bid against the rupee as ECB (External Commercial Borrowing) payments continued along with oil bids and FPI outflows. Dollar index fell to 106.20 while Asian currencies also gained.
"The US 10-year bond yield was also down since morning after falling about 20 bps yesterday. Meanwhile, Indian equities surged ahead by 0.8 per cent on risk on sentiments," Anil Kumar Bhansali Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Further, Bhansali said that rupee is expected to remain in a range of 83 to 83.35.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.65 per cent at 106.18.
Brent crude futures, the global oil benchmark, rose 1.43 per cent to USD 85.84 per barrel.
On the domestic equity market front, the BSE Sensex closed 489.57 points or 0.77 per cent higher at 64,080.90 points. The broader NSE Nifty advanced 144.10 points or 0.76 per cent to 19,133.25 points.
Foreign Portfolio Investors (FPIs) were net sellers in the capital markets on Wednesday as they sold shares worth Rs 1,816.91 crore, according to exchange data.