However, importers used the move to step up hedging and that capped the gains, according to bankers.
The local currency opened at 90.2150 and rose to an intraday high of 90.09, supported by dollar offers from state-run banks and a change in the way the daily fixing was quoted.
The rupee ended 0.1% higher at 90.1650, up from 90.2750 on Monday.
The fixing reflects the premium or discount bankers are willing to pay to buy or sell dollars at the Reserve Bank of India’s reference rate. This was quoted at a discount on the day, compared with a premium during most recent sessions.
A discount typically signals heavier interest in selling dollars at the RBI reference rate.
The rupee’s recent recovery is largely a tactical bounce driven by foreign bank dollar supply and a tentative return of foreign inflows, said Dilip Parmar, forex research analyst at HDFC Securities.However, the currency remains fragile as the structural mismatch between dollar demand from importers and limited supply persists. The trend remains neutral-to-bullish for the spot rate as long as it remains above 89.90.
Dollar demand from importers at any dip limited the rise in the local currency, despite dollar sales from state-run and foreign banks, traders said.
Asian cues were mixed for the rupee, with the dollar index extending the pullback from Monday, while Asian currencies were rangebound.
The focus this week is on a raft of U.S. economic data, particularly the U.S. jobs report due on Friday, for clues on how many times the Federal Reserve is likely to cut interest rates in 2026.
economictimes.indiatimes.com