Rupee was trading higher versus the US currency on Tuesday, helped by foreign equity inflows and a pullback of the dollar index.
The currency was trading at 79.81/$ in early trade, after closing at 79.9625 in the previous session.
Foreign investors have poured in about $6 billion into Indian equities this month, the biggest inflow since Dec 2020. This compares to the near $28 billion of outflows in the first six months of 2022.
On the debt side, overseas investors turned net buyers for the first time this year in August.
The rupee hit a record low of 80.12 on Monday over fears of more rate hikes from the Federal Reserve. The Reserve Bank of India likely intervened to support the rupee.
"In spite of a fresh all-time high yesterday, USD/INR has not seen any meaningful pickup in volatility," said Anindya Banerjee, head research - forex and interest rates at Kotak Securities.
"This could be due to the fact that unlike in the recent past, this time around, FPIs (foreign portfolio investors) are not selling Indian financial assets. With FPI flows remaining positive, RBI intervention becomes far more effective."
Most Asian currencies were flat, while the dollar index was hovering near 108.70. The dollar gauge has pulled back from multi-year highs, thanks to the euro.
Despite the pullback, the dollar remains supported by the Fed rate outlook. Fed Chair Jerome Powell hinted that US rates will remain high for longer to tame inflation, boosting bets of a 75 basis points hike next month.
