MUMBAI: The rupee depreciated 11 paise to 90.43 (provisional) against the US dollar on Wednesday, after a sharp rally in the previous trading session following India-US trade deal announcement, on suspected dollar buying by corporates and importers.
Forex traders said despite the positive sentiment after the India-US trade deal, caution still remains as there is no signed or officially released trade agreement yet -- no framework text or final documentation.
At the interbank foreign exchange, the rupee opened at 90.35 and touched an early high of 90.26 and a low of 90.54 against the greenback.
The domestic unit finally settled at 90.43 (provisional), down by 11 paise from its previous close.
On Tuesday, the Indian rupee emerged as the best-performing Asian currency, registering a record gain of 117 paise or 1.28 per cent in a single trading session to settle at 90.32 against the US dollar, after India and the US agreed to a trade deal.
Indian Rupee dipped on Wednesday, after a sharp rally in the previous session, as investors looked for more clarity on the terms of the India-US trade deal.
Weaker-than-expected services PMI also weighed on the rupee. The rupee rallied sharply on Tuesday amid trade deal optimism. However, an overnight surge in crude oil prices capped sharp gains, said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.
"We expect the rupee to trade with a positive bias as the India-US trade deal may boost domestic market sentiments. FII inflows and positive domestic equities may also support the rupee.
"However, elevated crude oil prices amid renewed tensions between the US and Iran may cap sharp gains. Traders may also take cues from ISM services PMI data from the US. USD-INR spot price is expected to trade in a range of 90 to 90.60," Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent lower at 97.40.
Brent crude, the global oil benchmark, was trading 0.10 per cent lower at USD 67.26 per barrel in futures trade.
"Oil prices have been volatile amid the US–Iran standoff, turbulence across broader commodity markets, and movements in the dollar index," said Kaynat Chainwala, AVP Commodity Research, Kotak Securities.
On the domestic equity market front, Sensex rose 78.56 points to settle at 83,817.69, while the Nifty was up 48.45 points to 25,776.
Foreign Institutional Investors purchased equities worth Rs 5,236.28 crore on Tuesday, according to exchange data.
India's services sector growth rose to a two-month high of 58.5 in January, on faster expansion in new business intake and output, prompting service providers to hire additional staff, a monthly survey said on Wednesday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose to a two-month high of 58.5 in January, from December's recent low of 58.0, mainly driven by demand buoyancy, new business gains and tech investment.