Mumbai, Dec 24 (PTI) The rupee appreciated 12 paise to 89.51 against the US dollar in early trade on Wednesday, supported by the RBI's major liquidity announcement and the weakness of the American currency in the overseas market.

Forex traders said the rupee started the day on a stronger note after the RBI announced sufficient liquidity for the markets to the extent of approx. Rs 3 lakh crore, which will also allow the RBI to keep rupee weakness under control.

At the interbank foreign exchange market, the rupee opened at 89.56 against the US dollar, then gained some ground and touched 89.51 against the US dollar, registering a gain of 12 paise over its previous close.

In the initial trade, it also touched 89.65 against the American currency. On Tuesday, the rupee settled at 89.63 against the US dollar.

"The dollar index was softer after the strong GDP growth of 4.3 per cent and with Asian currencies generally stronger, the rupee has managed to claw back," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Bhansali further added that, "Rupee is likely to remain broadly in the range of 89-90 while RBI protects both sides as it attempts to cut its short dollar positions.

"The RBI was seen actively managing the rupee to prevent excessive volatility and keep USD/INR from breaking 90 levels while it also bought dollars from the spot market to prevent the appreciation." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.07 per cent lower at 97.87.

Brent crude, the global oil benchmark, was trading higher by 0.02 per cent at USD 62.39 per barrel in futures trade.

On the domestic equity market front, the 30-share benchmark index Sensex rose 63.82 points to 85,588.66, while the Nifty was up 32.80 points to 26,209. 95.

Foreign Institutional Investors offloaded equities worth Rs 1,794.80 crore on Tuesday, according to exchange data.

The Reserve Bank of India on Tuesday said it will purchase government securities worth Rs 2 lakh crore and conduct a USD 10 billion buy/sell dollar-rupee swap auction to inject liquidity in the banking system.

The latest announcement comes days after the RBI conducted Rs 1 lakh crore OMO purchase auctions of Government of India securities and USD/INR Buy/Sell Swap auction of USD 5 billion for a tenor of three years. PTI DRR DR DR

Rupee strengthens after RBI announces government security purchases and a USD/INR swap to inject liquidity and stabilize the currency. The Reserve Bank of India announced purchases of government securities and a USD/INR buy/sell swap auction to inject liquidity into the banking system and to enable management of short dollar positions; those interventions are described as operational tools to moderate exchange-rate volatility and prevent the USD/INR rate from breaching key levels by allowing spot-dollar purchases as needed.