The rupee closed at 83.87 against the U.S. dollar, up from its close at 83.94 on Friday. The currency hit 83.85 during the session, its highest since Aug. 6.
The rupee saw choppy price action during the day as importers’ dollar bids pulled it off its fortnightly peak before it rose again towards the end of the session.
Despite the uptick on Monday, the rupee’s recent gains have largely been shallow due to outflows from local equities and strong dollar demand from local corporates, traders said.
Overseas investors have net sold $2.5 billion of Indian stocks over August so far. A broadly weaker dollar helped lift Asian currencies, which were up by 0.4% to 1.1%. The dollar index touched a low of 102, its weakest level in more than 6 months. “Seems like speculators are looking to explore some broad dollar weakness ahead of what should be the first Fed cut on 18 September,” ING Bank said in a note. Investors are currently pricing in 95 basis points of rate cuts by the Federal Reserve over 2024.
Remarks from Fed policymakers, including Chair Jerome Powell who is slated to speak on Friday, will be in focus this week to gauge the pace and extent of U.S. policy easing.
Investors will also pay attention the minutes of the Fed’s most recent meeting due on Wednesday.
Dollar-rupee far forward premiums were nearly unchanged on Monday. A dovish tone from Fed officials may spur an uptick given that the Indian central bank is broadly expected to keep policy rates unchanged this year, traders said.