Rupee Recovers Early Losses To End With Gains Against A Subdued Dollar

The rupee recouped its losses from early on Monday to end with gains against a restrained dollar as investor sentiment improved on solid domestic equities and an extension to the bull run in global risk assets from last week.

Bloomberg quoted the rupee changing hands at 79.5287 per dollar, compared to its previous close of 79.5838 after opening lower at 79.6387.

The news agency said the rupee traded in 79.4675 to 79.7213 range on Monday.

PTI reported that the rupee rose 4 paise to close provisionally at 79.53 against the US dollar.

"Rupee continued to appreciate as the dollar weakened against its major crosses. Market participants remained cautious also ahead of inflation and IIP numbers that will be released on the domestic front," Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal Financial Services, told PTI.

Mr Somaiya further said the expectation is that inflation could remain unchanged compared to the previous month.

"Gains in the currency were led also by a rally in domestic equities. The euro did witness volatility but hawkish central bank statements kept the currency supported at lower levels. We expect the USDINR (spot) to trade sideways and quote in the range of 79.40 and 80.05," he added.

The dollar index, which compares the value of the greenback to six important rival currencies, fell 1 per cent to 107.8, its lowest level in two weeks and below the two-decade high of 110.79 hit on Wednesday.

Investors are cautious before the US inflation report on Tuesday, which according to analysts at Commonwealth Bank of Australia, might determine the Federal Reserve will raise rates by 50 basis points or 75 basis points, even as policymakers maintained their harsh language on Friday.

On Monday, the euro surged to a more than three-week high against the dollar as officials from the European Central Bank pushed for even more aggressive monetary tightening as the dollar weakened against other major currencies with the exception of the under fire Japanese yen.

The euro jumped 1.45 per cent to $1.0198, its highest level since August 17, and far higher than last week's 20-year low of $0.9862.

"Positions are pretty stretched, everyone and his dog has been long dollar, and we had (ECB) comments over the weekend, which are very hawkish and that fed this perception that maybe the market is overdone," Jane Foley, head of FX strategy at Rabobank, told Reuters.

Ms Foley said the chance of lower US inflation data on Tuesday was also pushing investors away from the safe haven dollar, though this was likely just a pocket of profit taking.

"As long as the market is fearful of taking significant risk in high risk currencies the dollar will be firm for another six months or so," she said.