The rupee witnessed range-bound trade in the morning session on Thursday and appreciated by 2 paise to 83.97 against the US dollar, amid a positive trend in domestic equities and foreign fund inflows.
Forex traders said the rupee continues to hold steady within a well-defined range on active intervention by the Reserve Bank of India (RBI).
At the interbank foreign exchange market, the local unit moved in a narrow range. It opened at 83.97 against the American currency, registering a rise of 2 paise over its previous close.
On Wednesday, the rupee settled 1 paisa lower at 83.99 against the American currency.
"The central bank has been steadily absorbing inflows, and unless the RBI eases its grip, the rupee is likely to stay within this range," CR Forex Advisors MD Amit Pabari said.
In the near term, the rupee is expected to trade within a narrow band of 83.80 to 84.05, while the medium-term outlook slightly broadens the range to 83.70 to 84.05, Pabari added.
Forex traders said risk sentiment has improved post the US Aug CPI data. The US Aug headline CPI came in lower than expectations at 2.5 per cent year-on-year. Core CPI came in line with expectations at 3.2 per cent.
The stability in the US CPI data helped the dollar index maintain its current levels. The dollar index, which gauges the greenback's strength against a basket of six currencies, was up 0.07 per cent to 101.75 points.
Brent crude, the international benchmark, was trading higher by 0.58 per cent to USD 71.02 per barrel in futures trade.
On the domestic equity market, the 30-share BSE Sensex appreciated 289.66 points, or 0.36 per cent, to 81,812.82, while the Nifty was up 101.55 points, or 0.41 per cent, to 25,020.00 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Wednesday, as they purchased shares worth ₹1,755.00 crore, according to exchange data.