Rupee falls 2 paise to 86.55 against US dollar in early trade

MUMBAI: The rupee pared its initial marginal gain and slipped 2 paise to 86.55 against the US dollar in early trade on Wednesday as the positive sentiment in the domestic equity markets was negated by elevated crude oil prices and massive withdrawal of foreign funds.

A retreating American currency, however, supported the Indian currency at lower level, forex traders said.

At the interbank foreign exchange, the rupee opened at 86.50 and touched 86.45 against the greenback in initial deals. However, the local unit soon pared the gains and traded at 86.55 against the dollar, 2 paise lower from its previous close.

On Tuesday, the rupee rebounded from its lowest-ever level and settled with a gain of 17 paise at 86.53 against the dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent lower at 109.07.

Brent crude, the global oil benchmark, rose 0.06 per cent to USD 79.96 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex was trading 271.26 points, or 0.35 per cent, higher at 76,770.89 points, while the Nifty was up 50.80 points, or 0.22 per cent, at 23,226.85.

Foreign institutional investors (FIIs) offloaded equities worth Rs 8,132.26 crore on Tuesday.

Government data released on Tuesday showed that wholesale price inflation rose to 2.37 per cent in December 2024, led by a spike in manufactured products even though prices of food items eased.

Another data on Monday showed retail inflation declined to a four-month low of 5.22 per cent in December amid easing of prices in the food basket, fuelling expectations that the Reserve Bank of India (RBI) will reduce the key interest rate in upcoming monetary policy review on February 7.

The inflation based on the Consumer Price Index (CPI) eased for the second month in a row after it breached the RBI's upper tolerance level of 6 per cent in October.