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The rupee snapped its two-day losing streak and closed 7 paise higher at 85.80 (provisional) against the US dollar on Thursday, supported by positive domestic equities and a rise in Asian currencies.

Forex traders said overnight softening of crude oil prices favoured the rupee. However, a strong US dollar index capped sharp gains.

Besides, market participants are now keenly awaiting the outcome of the Reserve Bank of India's (RBI's) monetary policy meeting for further cues, they said.

At the interbank foreign exchange, the domestic unit witnessed a volatile trading session -- it opened at 85.86 and moved between a high of 85.67 and a low of 85.96 against the greenback during the day.

The local unit pared all its initial gains and settled for the day on the positive territory, higher by 7 paise at 85.80 against the American currency.

On Wednesday, the rupee depreciated for the second consecutive session and settled for the day lower by 26 paise at 85.87 against the US dollar.

"We expect the rupee to trade with a negative bias on positive tone in the US dollar and elevated crude oil prices. Ongoing trade tensions between US and China and geo-political tensions between Ukraine and Russia may also pressure the rupee.

"However, any fresh FII inflow may support the rupee at lower levels. Traders may take cues from weekly unemployment claims and trade balance data from the US. Investors may remain cautious ahead of RBI's monetary policy meeting decision on Friday," Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said.

The RBI's rate-setting panel started its three-day brainstorming on monetary policy on Wednesday, and the outcome is scheduled to be announced on June 6.

"There are expectations of a 25 bps rate cut. Investors may also watch out for the non-farm payrolls report from the US. USDINR spot price is expected to trade in a range of Rs 85.40-86.25.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.06 per cent at 98.85.

Brent crude, the global oil benchmark, rose 0.31 per cent to USD 65.05 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex surged 443.79 points, or 0.55 per cent, to close at 81,442.04, while the Nifty rallied 130.70 points, or 0.53 per cent, to 24,750.90.

Foreign institutional investors (FIIs) purchased equities worth Rs 1,076.18 crore on a net basis on Wednesday, according to exchange data. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)