MUMBAI: The rupee pared initial losses and was trading with gains of 4 paise at 95.40 against the American currency in early trade on Thursday, supported by easing Brent crude prices.
Brent prices fell below the USD 90 mark for the first time in several sessions amid continuing discussions between Iran and Oman regarding a temporary shipping corridor through the Strait.
While no final agreement has been reached, the fact that negotiations are continuing has reduced fears of a prolonged disruption to global oil supplies, forex traders said.
At the interbank foreign exchange market, the rupee opened at 95.50, then fell to 95.52 against the greenback, registering a fall of 8 paise from its previous close. The domestic unit pared the losses and was later trading with gains of 4 paise at 95.40 against the American currency.
On Tuesday, the rupee settled for the day higher by 26 paise at 95.44 against the US dollar.
The Indian foreign exchange market was closed on Wednesday on account of Id-e-Milad.
"While global attention remains focused on oil and the dollar, an equally important story is unfolding in India. After selling dollars for two consecutive months to support the rupee, the RBI turned into a net buyer in June, purchasing approximately USD 561 million," CR Forex Advisors MD- Amit Pabari said.
A major reason has been the RBI's special measures for FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECB). Together, these initiatives have attracted nearly USD 73 billion of foreign exchange inflows as of August 21.
"The FCNR(B) window remains open until August 31 and should continue to provide near-term support to the rupee. The 95.15–95.20 zone is expected to act as an important support area for USD/INR. However, the broader view continues to favour rupee depreciation, with the pair likely to move towards the 96.20–96.50 zone over the coming weeks," Pabari added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.14, lower by 0.04 per cent.
Brent crude, the global oil benchmark, was trading lower by 0.41 per cent at USD 87.48 per barrel in futures trade.
On the domestic market front, Sensex dipped 45.17 points to 77,422.70 in early trade, while the Nifty skid 6.40 points to 24,202.45.
Foreign institutional investors purchased equities worth Rs 502.63 crore on a net basis on Wednesday, according to exchange data
