The rupee ended unchanged on Tuesday after two sessions of gains, although investors remained bullish on the prospects of the local unit on the back of the government's new reforms push.
The rupee has rallied 2.6 per cent over the previous two sessions, buoyed by a suddenly emboldened government pushing ahead with a hike in diesel prices, as well as with action to attract foreign direct investments.
The government's renewed resolve, along with the Federal Reserve's new asset purchase programme, have already increased equities inflows.
Indian stocks have attracted Rs 5,110 crore in net foreign inflows in the last two sessions, or about half of the amount received for all of August.
"The sentiment has changed for the rupee. Any bounce in the USD/INR will be used to sell dollars," said Hemal Doshi, currency strategist at Geojit Comtrade.
The rupee closed trade at 54.01/02 per dollar, as per the State Bank of India closing rate, unchanged from its previous close.
It traded in the 53.96-54.375 range in a volatile session.
Traders cited heavy dollar demand from a large mutual fund house looking to meet redemptions in the morning session, but the rupee recovered most losses and briefly even gained on the day on the back of dollar sales from foreign funds.
The rupee could see gains in the days ahead as technical charts show the break of 54.03-18 for the USD/INR as significant, opening the way for a test of 52.95.
In the offshore non-deliverable forward market, the one-month contract was at 54.18 while the three-month was at 54.70.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 54.04 with a total traded volume of around $5.6 billion.
Copyright: Thomson Reuters 2012
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