The rupee closed at 84.25 against the U.S. dollar, up 0.4% on the day. The currency had touched a peak of 84.1275 in early trading but trimmed gains in the latter half of the session.
The dollar index was down 0.2% at 99.6 while the offshore Chinese yuan touched a near six-month high of 7.1876, buoyed by optimism about trade talks between China and the United States.
Oil prices, meanwhile, fell more than 2% on Monday after OPEC+ decided over the weekend to further speed up oil output hikes, spurring concerns about a glut of supply into an uncertain demand environment.
“We expect the USD/INR pair to stabilise in the range (of) 85-87 for 2025. The domestic impact of tariffs on the dollar will be visible in 2025, which will support rupee,” State Bank of India said in a note on Monday.
The bank expects the dollar to weaken further as the U.S. economy adjusts to the impact of tariff policies. Meanwhile, dollar-rupee forward premiums fell, with the 1-year implied yield down 9 basis points at 2.18%. Slimmer chances of a rate cut by the Federal Reserve in June and the rupee’s recent string of gains have both weighed on far-forward premiums, traders said.
A pick-up in portfolio inflows and cutting of bearish bets boosted the rupee by about 2% over the last four weeks. Meanwhile, the odds of a June rate cut by the Fed have declined to about 33% from nearly 64% a week earlier.
