The Indian rupee appreciated by 5 paise to 83.54 against the US dollar in early trade on Wednesday, buoyed by positive sentiments in the domestic equity market.

Forex traders highlighted that the rupee is trading within a narrow range, as market participants await significant economic data releases. On the global front, all eyes are on the US May Consumer Price Index (CPI) report and the Federal Reserve’s upcoming rate decision. Domestically, investors are keenly watching India’s Consumer Price Index (CPI) data.

Despite the appreciation, the rupee’s upward movement was restrained by the strength of the US dollar in the overseas market and elevated crude oil prices. These factors continue to weigh on the local unit, limiting its gains.

Key Factors Influencing the Rupee

1. Domestic Equity Market: Positive sentiments in the domestic equity market provided support to the rupee, contributing to its slight appreciation.
2. Global Economic Data: The market is awaiting the release of key economic indicators, including the US May CPI and the Federal Reserve’s rate decision, which are expected to influence global currency movements.
3. US Dollar Strength: The robust performance of the American currency in international markets exerted pressure on the rupee, capping its gains.
4. Crude Oil Prices: Elevated crude oil prices added to the challenges for the rupee, as higher import costs affect the trade balance.

Market Outlook

Forex analysts suggest that the rupee’s movement will continue to be influenced by both domestic and global economic developments. The release of the US CPI data and the Federal Reserve’s policy decisions are likely to set the tone for the currency markets in the coming days. Domestically, India’s CPI data will be a crucial determinant of market sentiment.

In summary, while the rupee managed to rise by 5 paise against the US dollar, its future trajectory will depend on a confluence of global and domestic economic factors. Investors and traders will closely monitor these developments to gauge the direction of the Indian currency in the short term.