The rupee recovered from its all-time low level and settled 4 paise higher at 83.34 against the US dollar on Tuesday, tracking the weakness of the American currency in the overseas market and positive domestic equities.
Forex traders said the rupee traded in a narrow range as dollar demand from oil marketing companies and sustained foreign fund outflows weighed on investor sentiments.
At the interbank foreign exchange, the rupee opened at 83.33 and finally settled at 83.34 against the greenback, registering a gain of 4 paise from its previous close.
During the day, the rupee witnessed range-bound trade reaching an intra-day high of 83.32 and hitting a low of 83.37 against the American currency.
On Monday, the rupee declined 12 paise to settle at its all-time low of 83.38 against the US dollar.
According to Anuj Choudhary Research Analyst at Sharekhan by BNP Paribas, the rupee gained slightly on weak US dollar and positive Asian markets.
However, FII outflows capped sharp gains. The dollar declined and fell to a two- and-a-half month low amid rising expectations of a no-rate hike by the US Federal Reserve in its upcoming Federal Open Market Committee (FOMC) meeting.
"Traders may take cues from existing home sales data from the US and FOMC minutes. Rupee may also take cues from volatility in crude oil prices. USD-INR spot price is expected to trade in a range of 83 to 83.70," Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.06 per cent at 103.37.
Brent crude futures, the global oil benchmark, fell 0.79 per cent to $81.67 per barrel.
According to exchange data, Foreign Institutional Investors (FIIs) were net sellers in the capital market on Monday, as they offloaded shares worth ₹645.72 crore.