The rupee traded in a narrow range and depreciated 9 paise to 87.16 against the US dollar in early trade on Wednesday, as global trade war has fuelled risk aversion among investors. Forex traders said the rupee is trading with a negative bias over global trade war as market participants mulled the impact of tariffs being imposed by the United States and China.
However, any central bank intervention may support the rupee, they added.
At the interbank foreign exchange, the rupee opened at 87.13 then fell further to 87.16 against the American currency, registering a decline of 9 paise over its previous close.
On Tuesday, the rupee recovered 4 paise from its all-time low level to close at 87.07 against US dollar.
"For now the trade war seems to have slowed down as we await comments from Donald Trump on European exports and also on currencies. Meanwhile, the rupee remains range bound within a range of 86.90/87.25," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Trump is pressing ahead with a 10 per cent tariff on US companies importing things from China. On Tuesday, China retaliated by announcing its own tariffs on some US products and an antitrust investigation into Google.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 107.89, lower by 0.06 per cent.
Brent crude, the global oil benchmark, was quoted 0.50 per cent lower at USD 75.82 per barrel in futures trade.
Investors may remain cautious ahead of the Reserve Bank of India's monetary policy meeting this week, traders said.
The Monetary Policy Committee (MPC) of the Reserve bank of India (RBI) will begin its three-day meeting on February 5. The MPC will announce its policy decisions on February 7.
Trump on Monday held off on his tariff threats against Mexico and Canada for 30 days after they pledged to boost border enforcement.
In the domestic equity market, the 30-share BSE Sensex was trading 17.96 points or 0.02 per cent down at 78,565.85 in morning trade, while Nifty was higher by 33.40 points or 0.14 per cent to 23,772.65.
Foreign Institutional Investors (FIIs) purchased equities worth Rs 809.23 crore in the capital markets on net basis on Tuesday, according to exchange data.
Source Name : Economic Times