Rupee consolidated in a narrow range and settled for the day higher by 3 paise at 83.24 (provisional) against the US dollar on Tuesday amid a positive trend in domestic equities.
Forex traders said the rupee is trading with a slight positive bias on positive domestic markets. However, a strong US dollar and concerns over the ongoing conflict in the Middle East capped sharp gains.
At the interbank foreign exchange market, the local unit opened at 83.24 against the US dollar and moved in a range of 83.22 to 83.26 in the day trade.
The rupee finally settled 3 paise higher at 83.24 (provisional) against the previous close.
Also read: Zinc futures: Initiate short positions
On Monday, the rupee settled at 83.27 against the US dollar.
"We expect the rupee to trade with a slight positive bias on the rise in risk appetite in global markets and decline in crude oil prices. Diplomatic efforts to contain the Middle East conflict may also support the risk assets," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.
However, elevated US dollar and any further escalation on geopolitical tensions between Hamas and Israel may cap sharp gains.
"Selling pressure from FIIs and RBI's maturing of dollar/rupee swap transactions may pressurise the rupee at higher levels. Traders may take cues from retail sales and industrial production data from the US. USD-INR spot price is expected to trade in a range of ₹82.90 to ₹83.70," Choudhary added.
Also read: HDFC Bank stock climbs nearly 2% post Q2 earnings
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.09 per cent to 106.33.
Brent crude futures, the global oil benchmark, advanced 0.41 per cent to $90.02 per barrel.
On the domestic equity market front, the BSE Sensex closed 261.16 points or 0.39 per cent higher at 66,428.09. The broader NSE Nifty advanced 79.75 points or 0.4 per cent to 19,811.50.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday as they sold shares worth ₹593.66 crore, according to exchange data.