The rupee appreciated by 18 paise to 85.56 against the US dollar in early trade on Friday, buoyed by sustained foreign fund inflows.
However, gains were tempered by concerns over global trade tensions following US President Donald Trump’s latest tariff measures.
At the interbank foreign exchange, the rupee opened at 85.64 against the greenback before strengthening to 85.56, marking an 18-paise gain from its previous close of 85.74.
The local currency had depreciated by 5 paise on Thursday.
Forex market participants noted that foreign institutional investors have poured over USD 2 billion into Indian equities over the past four days, while bond inflows for March have exceeded USD 3 billion.
This steady influx of funds provided support to the domestic unit.
According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, the rupee is likely to trade within a range of 85.60 to 86.00 as this session marks the last trading day of the week, month, quarter, and financial year.
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"There is a host of data to be released on March 31, which is otherwise a holiday, particularly the current account data of the last quarter. Exporters wait for better levels to sell," Bhansali observed.
However, global risk sentiment took a hit after President Trump signed an executive order imposing a 25 per cent tariff on automobile imports, reigniting fears of escalating trade conflicts.
Analysts caution that heightened trade frictions could impact investor sentiment in emerging markets, including India.
Meanwhile, the US dollar index, which measures the greenback’s strength against a basket of six major currencies, was trading marginally lower by 0.03 per cent at 104.30.
Brent crude futures, the global oil benchmark, saw a slight decline of 0.08 per cent, trading at USD 73.97 per barrel.
In the domestic equity market, the benchmark 30-share BSE Sensex was trading 165.16 points lower at 77,441.27, while the broader NSE Nifty slipped 41.55 points to 23,550.40.
Foreign institutional investors remained net buyers, purchasing equities worth ₹11,111.25 crore on Thursday, according to exchange data.