The Indian rupee appreciated 40 paise to 79.12 against the US dollar during early trade on Tuesday following a decline in dollar and inflows from foreign investors, dealers said.
The rupee remained at over 1 month high with this fall.
At the Interbank foreign exchange market, the rupee was trading at 79.12 against the US dollar, as compared to 79.52 close on the previous trading session.
"Rupee appreciated on back of weak dollar and inline CPI data for India which gave a positive impact for the rupee. Along with lower expected data of US CPI to come out later in evening expected at 8.1 per cent compared to 8.5 per cent giving negative rally to dollar as lower inflation data would add less pressure on FED's to hike rate by 0.75 bps and go with 0.50 or even 0.25 in case CPI comes even lower than expectations," said Jateen Trivedi, VP Research Analyst at LKP Securities.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.26 per cent to 107.782.
In the domestic equity market, Sensex was trading 470.64 points or 0.78 per cent higher at 60,585.77, and Nifty were 137.95 points or 0.77 per cent higher at 18,074.30.
On the domestic macroeconomic front, Consumer Price Index (CPI), spiked to 7.00 per cent in August, up from 6.71 per cent in July, due to uptick in food prices.
As the CPI hit the 7 per cent mark, it remained above the central bank's upper tolerance band of 6 per cent for the straight eighth month.
The government has mandated the central bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for a five-year period ending March 2026.
To tame inflation within the central bank's band, the Reserve Bank of India (RBI) has so far in this fiscal year raised repo rate by 140 basis points, but still it did not helped to keep inflation in their control and remained above upper tolerance band.
The Finance Ministry had attributed the rise in inflation to base effect and increase in food and fuel prices, and stressed that initiatives taken by the government to curb price rise will be felt more significantly in the coming months.
