The Indian rupee erased most of the gains to end flat against the US dollar on Monday.
The Indian unit settled at 86.71 a dollar, according to Bloomberg data. The rupee opened 13 paise higher at 86.58 against the greenback, which gave up gains after data showed that US business activities slumped to a 17-month low.
The dollar index fell 0.46% to the day's low of 106.12 so far.
"Given the current dynamics, the USDINR pair is expected to trade within the 86.60–87.20 range. said Amit Pabari, managing director of CR Forex Advisors. "The 87.20 level is emerging as a strong resistance, while 86.50 remains a critical support zone."
A decisive breach below 86.50 can open the door for further appreciation towards the 85.80–86.00 levels, strengthening the rupee further, Pabari said.
In the forward market, premium on one-year dollar-rupee forward contracts declined to 1.96%, the lowest level since Dec. 5. The premium slumped as the Reserve Bank of India is set to conduct a three-year dollar-rupee buy-sell swap on Friday.
The premium on one-year dollar-rupee forward contract settled at 2.04% on Monday.
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