The rupee traded on a flat note to settle just 1 paisa lower at 84.07 (provisional) against the US dollar on Friday as lower crude oil prices and a weak greenback offset the impact of persistent foreign capital outflows.
A positive momentum in the domestic equity markets supported the local currency and restricted its fall, traders said.
At the interbank foreign exchange market, the local unit opened at 84.06 against the greenback and stayed almost flat during the entire session. The unit finally settled at 84.07 (provisional) against the dollar, registering a loss of 1 paisa from its previous close.
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On Thursday, the rupee weakened by 4 paise to close at 84.06 against the US dollar.
A recovery in the domestic markets and softness in the US dollar prevented a sharp fall in the rupee, Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.
He said that the rupee is expected to trade with a negative bias on the overall strong dollar amid renewed geopolitical tensions in the Middle East following Israel's killing of a top Hamas leader.
"Volatility in crude oil prices may also weigh on the rupee. However, any intervention by the RBI may support the rupee at lower levels. USD-INR spot price is expected to trade in a range of Rs 83.90 to Rs 84.30," he added.
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Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down by 0.14 per cent to 103.50 points.
Brent crude, the international benchmark, dropped 0.16 per cent to USD 74.33 per barrel in futures trade.
On the domestic equity market front, Sensex climbed 218.14 points, or 0.27 per cent, to 81,224.75 points. The Nifty also rose 104.20 points, or 0.42 per cent, to 24,854.05 points.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 7,421.40 crore, according to exchange data.
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