Mumbai: The Indian rupee trimmed most of its gains in afternoon trade on Tuesday as shares briefly turned negative after having risen earlier in the day, but losses in the dollar versus major currencies continued to boost.
Dealers said the unexpected rate hike by the Reserve Bank of India late on Friday was also underpinning sentiment for the rupee.
Last week, the RBI raised rates for the first time since it began cutting in 2008, citing intensifying inflationary pressures and a steady economic recovery.
At 2:15pm, the partially convertible rupee was at Rs45.57/58 per dollar, marginally stronger than Rs45.59/60 at close on Monday, when it dropped to Rs45.5975, its weakest since 15 March.
A Reuters poll on Monday found that 18 of 20 economists surveyed expect another increase in both the repo and reverse repo rates on 20 April.
Shares were trading marginally higher after having turned briefly negative earlier in the session.
The euro held its ground on Tuesday after rebounding from a three-week low against the dollar, helped by an improvement in risk appetite following gains in US stocks but still stymied by squabbling over Greece.
One-month offshore non-deliverable forward contracts were quoted at Rs45.71, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both quoting at Rs45.5975, with the total traded volume on the two exchanges at about $3.7 billion.