Mumbai

The rupee pared early gains and closed 16 paise lower at 89.79 (provisional) against the US dollar on Wednesday, pressured by continued foreign fund outflows and strong dollar demand from bullion importers.

Forex traders said the Reserve Bank of India’s announcement of USD/INR swaps and open market operations (OMO) failed to lift market sentiment amid persistent dollar demand and firm crude oil prices.

At the interbank foreign exchange, the rupee opened at 89.56 against the greenback and touched an intraday high of 89.51 before reversing gains. It eventually settled at 89.79, down from its previous close of 89.63 on Tuesday.

“The move in USD/INR was driven by a shift towards risk aversion ahead of the holiday period, with sustained capital withdrawals by foreign investors and heightened dollar demand from bullion importers,” said Dilip Parmar, Senior Research Analyst at HDFC Securities.

He said the RBI’s liquidity measures did little to narrow the widening gap between dollar supply and demand. “Despite the announcement of USD/INR swaps and OMO purchases, market enthusiasm remained muted,” Parmar added.

Parmar said the outlook for spot USD/INR remains upward as long as it holds above the 89.00 level, though the 90.30 mark continues to act as a strong resistance.

Meanwhile, the dollar index, which measures the greenback against a basket of six currencies, was down 0.13 per cent at 97.81.

Brent crude, the global oil benchmark, rose 0.22 per cent to USD 62.52 per barrel in futures trade.

In the domestic equity market, the BSE Sensex fell 116.14 points to close at 85,408.70, while the Nifty declined 35.05 points to 26,142.10.

Foreign Institutional Investors (FIIs) sold equities worth Rs 1,794.80 crore on Tuesday, according to exchange data.

On Tuesday, the RBI announced it would purchase government securities worth Rs 2 lakh crore and conduct a USD 10 billion dollar-rupee buy/sell swap auction to inject liquidity into the banking system.

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The move followed earlier liquidity measures, including OMO purchases of Rs 1 lakh crore and a USD 5 billion USD/INR swap auction with a three-year tenor.