After opening on a weak note, the rupee recovered the lost ground and finally settled 14 paise higher at 68.75 against the US dollar on Monday amid easing crude oil prices. At the interbank foreign exchange (forex), the domestic currency witnessed a heavy volatility. The local unit opened at 68.92 a dollar and touched a low of 68.95 and high of 68.73 during the day.
The local unit finally closed at 68.75 against the American currency, registering a rise of 14 paise over its previous close. On Friday, the rupee had settled at 68.89 against the US dollar.
Forex traders said the rupee is trading in a narrow range as market participants are awaiting cues from the Federal Open Market Committee (FOMC) meeting on July 31. "All eyes now rivet onto the FOMC meeting on Wednesday wherein markets are pricing a 25 bps rate cut," said Rajesh Cheruvu CIO of Validus Wealth.
Besides, market participants are also looking forward to the US and China trade talks, which can impact rupee movement. The US and Chinese officials are restarting negotiations in Shanghai on Tuesday in an effort to resolve the year-long trade dispute.
Cheruvu further noted that "domestically, FM Nirmala Sitharaman's proposal of going ahead with sovereign currency bonds could help soften India G-Sec yields as this would reduce supply of onshore GOI bonds". The 10-year government bond yield was at 6.41 per cent on Monday.
According to VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities, this week will be the very busy and big for the forex market as there are series of economic and political events are lined up.
"The week will start with the US China trade meets and wrap by US employment data. In between, Bank of Japan, Bank of England and FOMC monetary policy decision will be watched for future path of forex market," he said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.09 per cent to 98.10. Brent crude futures, the global oil benchmark, fell 0.20 per cent to trade at USD 63.33 per barrel.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,503.26 crore on Friday, as per provisional data.
Meanwhile, on the domestic market front, equity benchmark Sensex fell by 197 points on Monday, tracking weak global cues and unabated foreign fund outflows. Similarly, the NSE gauge Nifty slipped by 95 points.