The rupee pared some of the sharp gains from earlier in the session on Thursday, as the dollar recovered from a five-week low to trade higher as markets were getting ready for another significant rate hike from the European Central Bank.
According to Bloomberg, the rupee was last changing hands at about 82.50 per dollar after opening at 82.13, compared to its previous close of 82.73 on Tuesday.
PTI reported that the domestic currency rose 31 paise to close provisionally at 82.50 against the US dollar.
Reuters said the rupee slipped to almost 82.50 by close on dollar demand related to the daily fixing and from importers after opening at 82.15 per US dollar compared to the previous close of 82.7250.
"The rupee opened sharply higher at 82.1350, and the dollar remained well bid since that level as oil companies, and importers sprang in to catch the lower levels of the pair," said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
"The USD/INR pair ended at 82.50 and is expected to remain well bid on dips until the Federal Reserve indicates a change in its policy stance," he added.
The dollar index, which measures the greenback's performance against a basket of major currencies, had hit a five-week low of 109.53 earlier in the session but recovered slightly to trade up 0.2 per cent on the day.
Market sentiment turned negative as traders digested a flurry of major company earnings reports and prepared for another jumbo European Central Bank rate hike later Thursday.
But this month, the central banks of two developed countries surprised market participants with lesser rate increases than anticipated, increasing the likelihood that the Fed will change course.
In contrast to the 75 bps forecast, the Bank of Canada cut rates by 50 basis points on Wednesday. The Reserve Bank of Australia increased rates earlier this month by 25 basis points instead of the anticipated 50 basis points.
"The market will no doubt be awash with speculation about whether this (the BOC move) represents part of the "pivot" story," ING Bank told Reuters.
"Next move - the Fed. They can either quash any such thoughts or, as it seems to have been doing recently, kindle them with some encouraging noises even as it hikes rates by 75 bps next week."
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.