Mumbai: The rupee on Tuesday surrendered most of its early strong gains but eventually managed to end higher by three paise at 68.18 against the American currency in a range bound trade amid weak dollar overseas.
Mild dollar selling by banks and exporters in the face of subdued overseas sentiment alongside a smart recovery in equities largely supported the domestic currency, which struggled to stay positive.
Meanwhile, domestic equities snapped a two-day losing streak and staged a smart rebound on value-buying alongside some short-covering despite lacklustre Asian cues.
The domestic unit opened on a strong footing at 68.08 from Monday's closing value of 68.21 at the Interbank Foreign Exchange (Forex) market on fresh bouts of dollar selling and gained further ground to touch an intra-day high of 67.98 in late morning deals.
However, it witnessed high amount of volatility towards the fag-end trade after moving erratically in a range following some dollar demand and relinquished early strong gains to end marginally higher at 68.18, showing a small gain of 3 paise, or 0.04 per cent.
It had tumbled by 25 paise on Monday.
In worldwide trade, the greenback fell back against a basket of the other major currencies despite overnight highly positive comments from Fed officials for the US central bank to step up the pace of interest rate increases, warning that inflation could overshoot its target if it does not.
The US dollar index was trading firmly higher at 101.94 in late afternoon deals.
The RBI fixed the reference rate for the dollar at 68.0641 and for the euro at 72.1820.
In cross-currency trades, the rupee strengthened further against the pound sterling to finish at 82.80 from 83.03, but declined against the euro to conclude at 72.15 as compared to 71.75 yesterday.
It also drifted against the Japanese Yen to end at 58.73 per 100 yens from 58.37 earlier.
On the domestic equity front, flagship Sensex recouped recouped 173.01 points to end at 26,899.56, while broader Nifty recovered over 52 points to close at 8,288.60.
Foreign funds remained net sellers in equities and sold worth a net Rs 325.10 crore on Monday.
In the forward market, premium for dollar moved down due to fresh receiving from exporters.
The benchmark six-month premium for June slipped to 149-151 paise from 151.5-153 paise and the far-forward December 2017 contract also edged down to 289-291 paise from 291-293 paise on Monday.
Crude oil prices stabilised after a sharp sell-off overnight on the back of weak dollar as well as modest bout of short-covering.
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