Mumbai: Snapping its two-day losing streak, the rupee ticked higher by 23 paise to close at 71.57 per US dollar on Tuesday amid fresh foreign fund inflows and gains in domestic equities.
Forex dealers said investors were cautious ahead RBI's Monetary Policy Committee outcome scheduled for February 7.
"Rupee is consolidating in the range, as most of the Asian region's markets shut for Lunar New Year holidays. Near term focus of domestic forex market will be on three-day central bank policy meet, starting on Tuesday," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities.
At the Interbank Foreign Exchange, the rupee opened stronger at 71.72 a dollar. The local unit moved in a range of 71.55 to 71.80, before finally ending at 71.57, showing a gain of 23 paise. On Monday, the rupee had plunged by 55 paise to close at 71.80 against the US dollar.
Forex traders said sustained foreign fund outflows and surging crude oil prices restricted the rupee up move. Foreign funds purchased shares worth Rs 420.65 crore on a net basis, and domestic institutional investors bought shares worth Rs 194.31 crore on Tuesday, provisional data showed.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.13 per cent at 95.97 ahead of US President Donald Trump's State of the Union address.
Meanwhile, brent crude, the global benchmark, was trading higher at 62.87 per barrel higher by 0.58 per cent. Benchmark equity indices ended marginally higher.
The 30-share Sensex ended 34.07 points, or 0.09 per cent, higher at 36,616.81. Similarly, the NSE Nifty edged up 22.10 points, or 0.20 per cent, to 10,934.35. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.7459 and for rupee/euro at 82.0147.
The reference rate for rupee/British pound was fixed at 93.5624 and for rupee/100 Japanese yen at 65.29.