Mumbai, Jul 29: The rupee gained 4 paise to settle at 74.80 against the American dollar on Wednesday tracking weakness in the greenback.
At the interbank forex market, the rupee traded in a narrow range. It started the day at 74.83 and closed at 74.80, up 4 paise over its previous closing of 74.84 against the US dollar.
The USD-INR spot traded in a very narrow range of 74.75-75. US Fed's policy outcome, scheduled to be announced later in the day, will provide some clarity over the trend, said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
On Fed's policy decision, Gupta said, "We don't expect a rate action. If the-policy turns out to be ultra easy then we can see some fall in dollar index and may get reflected in USD-INR spot."
Gupta further suggested that "the policy will be reiteration of past measures. So, 74.50 will keep acting as a crucial support while 75 will act as an immediate resistance. Unless 75 breaks, we will see the spot trading in between 74.50-75."
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.24 per cent to 93.47.
On the domestic equity market front, the 30-share BSE benchmark Sensex declined 421.82 points or 1.10 per cent to 38,071.13 while the NSE Nifty tumbled 97.70 points or 0.86 per cent to 11,202.85.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 245.95 crore on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 1.02 per cent to USD 43.66 per barrel.
"Dollar is weaker against major currencies ahead of FOMC rate decision, scheduled later tonight. Rupee is likely to gradually rise amid broad dollar weakness, providing some steady carry returns to investors chasing rupee-denominated assets," said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.
Vakil further noted that "markets do not expect any significant changes to either the statement or the message from Federal Reserve Chair Jerome Powell, with the Fed expected to keep policy accommodative and to reiterate its willingness to use all instruments to support the economy".
According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, rupee rose marginally against the US dollar despite weakness in domestic equities and ahead of the important FOMC policy statement.
"Expectation is that the central bank could hold rates unchanged and after the announcement of stimulus package commentary is expected to be less dovish as compared to the previous meeting," Somaiya said.
Apart from Fed policy statement, market participants will also be keeping an eye on preliminary GDP number that will be released on Thursday. "We expect USDINR (Spot) to quote in the range of 74.50 and 75.05," Somaiya added.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 74.7458 and for rupee/euro at 87.7212. The reference rate for rupee/British pound was fixed at 96.1550 and for rupee/100 Japanese yen at 70.83.