The rupee strengthened against the US dollar on Monday as the dollar index remained steady. The Indian unit opened 3 paise higher against the US currency at 85.94.
"The market waited for the Reserve Bank of India's buy-sell swap auction on March 24 and also whether RBI will cuts its short positions in the market as it had done in January and February. The Government of India also does not want its Central Bank to be termed as currency manipulator by US President Donald Trump and possibly therefore RBI would have allowed this appreciation (on Friday) to have happened," said Anil Kumar Bhansali, head, treasury and executive director, Finrex Treasury Advisors LLP.
He expects Rupee be in the 85.60 to 86.60 range on Monday.
The rupee settled at over two-month high of 85.97 a dollar on Friday. The domestic unit recorded gains for eight consecutive sessions, against the greenback. "The Indian rupee posted its strongest weekly gain in over two years, appreciating by 1.2% to close at 85.9725 against the US dollar—retracing nearly 50% of its move from 84 to 87.95," said Abhishek Goenka, founder and CEO India Forex & Asset Management (IFA Global).
This rally was fueled by strong foreign inflows, including an estimated $1.5 billion from the FTSE All-World Index rebalancing, improved domestic equity sentiment, and the unwinding of speculative long-dollar positions, he said.
Crude oil prices declined in early trade, providing support to the Indian currency. The Organization of Petroleum Exporting Countries and its allies said that it will revive the idled production from April. According to Bloomberg, output will increase by 138,000 barrels per day after this move, which will be first in the series of monthly hikes.
Brent crude future was trading 0.46% down at $71.83 a barrel as of 8:55 a.m.
The dollar index, which measures the strength of the greenback against six major currencies across the globe, was trading slightly higher in Asia session. It was trading flat at 104.10 as of 8:55 a.m.
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