The rupee closed higher by 26 paise at 73.12 (provisional) against the US dollar on Wednesday and ended the fiscal on a strong note with a gain of over 3 per cent despite coronavirus-induced disruptions on the economic front.
At the interbank forex market, the local unit opened at 73.56 against the greenback and witnessed an intra-day high of 73.05 and a low of 73.58.
It finally ended at 73.12 against the American currency, registering a rise of 26 paise over its previous closing. On Tuesday, the rupee had settled at 73.38 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.10 per cent to 93.20.
Forex traders said market participants remained cautious as the Indian currency market will remain shut for the next two sessions. The market will be closed on Thursday and Friday for annual bank closing and Good Friday holiday, respectively.
"Despite a truncated week, the forex market has been very volatile. The spot breached 73 on the back of uptrend in dollar. The market focus is on US President Joe Biden's additional stimulus announcement and an additional spending boost will further support the dollar rally," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further noted that "the best thing to do for now is to follow the trend and let the market tell you where it's going to end. In USD-INR spot we expect the trading range to be 72.50-73.50."
Meanwhile, Brent crude futures, the global oil benchmark, fell 0.48 per cent to USD 63.83 per barrel.
On the domestic equity market front, the BSE Sensex ended 627.43 points or 1.25 per cent lower at 49,509.15, while the broader NSE Nifty declined 154.40 points or 1.04 per cent to 14,690.70.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 769.47 crore on Tuesday, according to exchange data.
"Rupee outperformed among Asian currencies, rebounded after touching one month low ahead of economic data that’s likely to show recovery in economy," said Dilip Parmar, Research Analyst, HDFC Securities.
Parmar further added that all eyes will be on the market data of eight-core infra, balance of payment, fiscal deficit number and government borrowing plan for first half of the fiscal year. "The impact of number will be seen on Monday as currency derivative markets remain close on Thursday and Friday," he said.
Meanwhile, the dollar index inched lower ahead of US President Biden's announcement of the infrastructure plan.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities "the Indian Rupee appreciated against the US dollar this Wednesday as the greenback gave up morning gains, while bond yields softened ahead of the Biden administration release of the Infrastructure plan".
In the international markets, the dollar was trading marginally in the red this Wednesday afternoon trade.
US President Biden is set to outline later tonight how he intends to pay for a USD 3 - USD 4 trillion infrastructure plan.
Investors also await the US employment report for March, including non-farm payrolls, due out on Friday. A precursor to the non-farm payrolls is ADP’s payrolls data for the month of March which is due later in the day.
