Rupee strengthens amid foreign banks' dollar sales

The rupee saw a commendable gain on Wednesday mirroring the upward trajectory witnessed by most Asian currencies, thanks to significant dollar sales from two prominent foreign banks.

Closing the day's trading session at 82.9675 against the US dollar, the rupee marked a 0.11 per cent rise compared to its previous close at 83.0550.

The dollar index remained relatively stable near 104 following a slight retreat on Tuesday from its recent rally, which saw it reach its highest level in almost three months.

Across Asia, currencies showed strength, with the Indonesian rupiah leading the pack with a 0.6 per cent gain. The positive sentiment spilled over into Asian equities, bolstered by China's initiatives to support its struggling stock market.

Foreign exchange traders attributed the rupee's upward momentum to significant dollar sales by two major foreign banks.

Analysts foresee the local currency maintaining a tight range, with projections suggesting a slight uptick to 82.84 in three months and 82.40 within a year. This forecast aligns with expectations of continued intervention by the Reserve Bank of India in the currency market.

While the greenback faced pressure on Wednesday, supported by strong US economic data and reduced expectations of aggressive rate cuts by the Federal Reserve, it still managed to record a year-to-date gain of approximately 2.7% against a basket of currencies.

All eyes are on the Reserve Bank of India's forthcoming monetary policy decision scheduled for Thursday. Market consensus anticipates the RBI's rate-setting panel to maintain rates unchanged for the sixth consecutive meeting.

(With Reuters inputs)