By Rohit Vaid

Mumbai, Dec 5 (IANS): Healthy foreign fund inflows along with supportive monetary policy are expected to strengthen the rupee during the trade week ahead.

Lately, FIIs inflows have powered a rally in equities and gave an appreciation push to the rupee.

The FIIs were net buyers last week. They had invested over $2 billion in the equity segment.

However, Reserve Bank's interventions to build-up India's forex reserves are likely to arrest any sharp appreciation in the rupee.

Last week, the rupee traded in a tight range of 73.45 and 74 as RBI was said to have absorbed US dollars at lower levels.

The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.

"Equity flows would help the rupee to remain strong with a mild appreciation bias," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.

"Expect the next week range to 73.40 to 73.90 with appreciative rupee bias."

Besides, the RBI's MPC expectedly kept its policy rate unchanged at 4 per cent, and continued with the accommodative policy stance.

The MPC reiterated that the stance is likely to remain accommodative as long as necessary - at-least through this fiscal.

On the Forex front, central bank said that it is "mindful of the consequences of its FX intervention action on domestic liquidity and inflation" also added "the RBI has taken measures for dampening volatility".

"There are talks of further stimulus by the US authorities and that is likely to put more pressure on US Dollar in the medium term," said Devarsh Vakil, Deputy Head of Research at HDFC Securities.

"Technically, spot USDINR has near-term support at 73.5 and likely to trade between 73.5 to 74 mark next week."

According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services: "We expect that a sharp surge in global crude oil prices could start to dampen the overall sentiment and could lead to higher inflation going ahead."

"On the domestic front, market participants will be keeping an eye on how the dollar flows happen. At the same time, from the US, focus will be ECB policy statement and expectation is that the overall outlook may be little dovish. For the week, we expect the USDINR (Spot) to trade lower and quote in the range of 73.20 and 74.20."