The rupee strengthened to 54.42 in the afternoon trade on renewed selling of dollar by banks and exporters amid sustained foreign capital inflows.
The domestic unit opened marginally lower at 54.73 against the dollar as investors remained cautious ahead of the US earnings season. It had closed at 54.69 on Wednesday.
A better-than-expected performance by key US companies might increase the investors’ confidence in dollar, thereby undermining the Indian rupee.
Also, uncertainty over the policy rate cut by the Reserve Bank of India is adding pressure on the domestic unit.
Currency traders will also look at China, which will release a series of key economic data including the fourth-quarter gross domestic product figures on Friday.
Demand for the American currency from oil importers and banks is also likely to keep the rupee compressed.
