Given the initial loss of the rupee, an increase in COVID-19 cases against the US currency by 12 paise at 73.42 (provisional) on Tuesday and subsequent lockout in some states could hurt the economic recovery.
In the interbank foreign exchange market, the local unit opened against the greenback at 73.22 and traded in the range of 73.20 to 73.42 through the day.
Finally, the rupee closed at 73.42 against the US currency, registering a decline of 12 paise against the previous close of 73.30.
According to data released by the Union Health Ministry on Tuesday, the daily growth of new coronovirus infections in India was above 90,000 for the third consecutive day, as against 1,26,86,049 cases of COVID-19 nationwide.
Forex traders said rising investor sentiment was also affected by rising crude oil prices and the strengthening of the US currency in the foreign market.
Meanwhile, the Dollar Index, which estimates the strength of the greenback against a basket of six currencies, rose 0.13% to 92.71.
Brent crude futures, the global oil benchmark, were trading up 2.37% at $ 63.62 a barrel.
On the domestic equity market front, the BSE Sensex rose 42.07 points, or 0.09%, to close at 49,201.39, while the broader NSE Nifty rose 45.70 points, or 0.31%, to 14,683.50.
Foreign institutional investors were net sellers in the capital market on Monday, as they closed shares worth 6 931.66 crore, according to exchange data.
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