Mumbai | The rupee fell 10 paise to close at 94.86 (provisional) against the US dollar on Monday, weighed down by a firm greenback in overseas markets.
Forex traders said the Indian rupee is showing signs of near-term stabilisation after recovering sharply against the US dollar in previous sessions.
A positive trend in domestic equities and softening of crude oil prices, however, cushioned the downside.
At the interbank foreign exchange market, the rupee opened down at 94.90 and fell further to a low of 95.04 in intraday trade. The unit recouped some losses in the closing session to settle at 94.86 (provisional), down 10 paise from its previous close.
On Friday, the rupee appreciated 50 paise to close at 94.76 against the US dollar.
"The recovery remains vulnerable as weakness across Asian currencies and uncertainty in global equity markets continue to influence dollar demand," said Gaurav Garg, Head - Research, Lemonn.
Garg further noted that going forward, USD/INR is likely to remain sensitive to crude oil developments, the sustainability of foreign investor inflows, movements in Asian currencies and global risk appetite.
The immediate trading range to monitor is 94.70–95.30, with a sustained move above 95.30 indicating renewed depreciation pressure, while holding below 94.70 could strengthen the recovery.
Overall, the rupee has gained some breathing room, but a durable recovery will require consistent foreign capital inflows, improved global risk sentiment and continued moderation in energy prices.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 101.61, lower by 0.26 per cent.
Brent crude, the global oil benchmark, was trading lower by 3.48 per cent at USD 109.95 per barrel in futures trade.
On the domestic equity market front, Sensex jumped 1,233.25 points to settle at 75,692.78, while the Nifty surged 387.70 points to 23,440.80.
Foreign Institutional Investors (FIIs) turned net buyers and purchased equities worth Rs 3,598.54 crore on a net basis on Friday, according to exchange data.
According to the RBI data released on Friday, India's forex reserves dropped by USD 1.269 billion to USD 719.748 billion during the week ended October 30. The overall reserves had dropped by USD 5.011 billion to USD 721.016 billion in the previous reporting week ended October 16.
On the domestic macroeconomic front, India's manufacturing sector activity growth eased in October as output and new orders rose at softer rates, while moderate cost pressures provided support and a buffer against a sharper decline.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) fell to 54.7 in October from 55.1 in September. Still, it remained above its long-run average and comfortably above the neutral mark of 50.0.
