UAE: Indian rupee inches higher against dirham

The Indian rupee appreciated by seven paise against the US dollar in early trade on Wednesday, amid a muted trend in domestic equities.

Forex traders said the rupee is trading in a narrow range as investors remain cautious ahead of the BRICS summit and US Federal Reserve Chair Jerome Powell's speech at Jackson Hole Symposium this week.

At the interbank foreign exchange, the South Asian currency opened at 83.02 (22.62 against the UAE dirham), then touched a high of 82.92 against the US dollar (22.59 against dirham), registering a rise of seven paise over its closing rate.

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The currency recently hit a low of 83.16, from which it recovered primarily on the Reserve Bank of India's (RBI) repeated intervention, both in non-deliverable forwards and on over-the-counter.

"The RBI looks quite committed to preventing a record low (for the rupee)," a forex trader at a bank said.

"When you combine that with the price action, it does seem to me that the risk-reward (for short rupee positions) is now poor."

Amit Pabari, managing director at fx advisory firm CR Forex, said that thanks to the RBI, the rupee's losses "are likely to remain limited to the 83.15-83.25 zone."

The rupee's Asian peers were mostly lower after the dollar index reached a more-than-two-month high in Tuesday's New York session. The move higher in near-maturity U.S. yields boosted demand for the dollar.

The 2-year US yield is now at 5.04 per cent, just eight basis points shy of its high in the current Federal Reserve rate hike cycle.

• Dollar shine fades as risk appetite rebounds for now