The Indian rupee closed higher on Monday, buoyed by gains in Asian currencies that pushed the rupee to a two-week high.
The rupee rose to close at 83.87 against the US dollar, up from Friday's close of 83.94, and hit 83.85 during the trading session, its highest since August 6.
The rupee was volatile throughout the day, having been pulled back from a two-week high by dollar buying bids from importers, before regaining strength towards the end of the session.
Despite Monday's gains, the rupee's recent gains have been largely modest due to outflows from domestic equities and strong dollar demand from domestic companies, traders said.
Foreign investors have sold $2.5 billion of Indian stocks net so far in August. A broader dollar weakening helped Asian currencies rise 0.4% to 1.1%. The dollar index hit 102, its lowest in more than six months. “Speculators appear to be looking for broad dollar weakness ahead of the Fed's first rate cut, scheduled for Sept. 18,” ING Bank said in a note. Investors are now pricing in 95 basis points of Fed rate cuts through 2024.
To gauge the pace and extent of U.S. monetary easing, attention this week will be focused on comments from Federal Reserve policymakers, including Chairman Jerome Powell, who is scheduled to speak on Friday.
Investors will also be keeping an eye on the minutes of the Fed's latest meeting, which are due to be released on Wednesday.
The dollar-rupee futures premium was little changed on Monday as traders said a dovish tone from Federal Reserve officials could spur gains as the Indian central bank is widely expected to keep interest rates unchanged this year.
