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The rupee depreciated 12 paise to 79.06 against the US dollar in early trade on Thursday as the hawkish stance of the US Federal Reserve increased the possibility of another rate hike this month.
However, according to forex traders, the steps announced by the RBI on Wednesday limited the depreciation bias in the rupee.
At the interbank foreign exchange, the rupee opened at 79.05 against the American dollar, then lost ground to quote at 79.06, registering a fall of 12 paise from the last close.
In initial trade, the rupee witnessed a high of 78.90 against the American currency before the rupee closed at 78.94 against the US dollar on Wednesday.
RBI took several steps to increase forex inflows to limit rupee's fall, Sriram Iyer, Senior Research Analyst at Reliance Securities, said.
"It will be difficult to find out about the quantum of flows which come into the markets but the measures could provide some stability to the rupee," Iyer noted.
However, Iyer said the US Federal Reserve's minutes of the meeting held last month were released on Wednesday indicated a hawkish stance as a rate hike of 75 basis points is likely in July.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.21 per cent higher at 106.87.
Global oil benchmark, Brent crude futures rose 0.78 per cent to USD 101.48 per barrel.
On the domestic equity market front on Thursday, the 30-share Sensex was trading 317.33 points or 0.59 per cent higher at 54,068.30 points, while the broader NSE Nifty advanced 95.95 points or 0.6 per cent to 16,085.75 points.
The RBI on Wednesday, in efforts to curb the fall of the rupee, raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds by announcing a slew of measures to boost foreign exchange inflows.
The central bank said it has been closely and continuously monitoring the liquidity conditions in the forex market, stepping in as needed in all its segments to alleviate dollar tightness with the objective of ensuring orderly market functioning. As per stock exchange data, foreign institutional investors were net sellers in the capital market on Wednesday, offloading shares worth ₹330.13 crore.
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