India rupee ends higher but oil companies’ dollar buys cap gains

By Jaspreet Kalra

MUMBAI (Reuters) – The Indian rupee closed stronger on Monday but underperformed its Asian peers as U.S. dollar demand from local oil companies and importers capped gains.

The rupee settled at 83.2150 compared with its close at 83.2850 in the previous session.

A weaker dollar and a fall in U.S. Treasury yields sparked a rally among Asian currencies, with the Malaysian ringgit, up by nearly 2%, leading gains.

The rupee opened at 83.14 but shed some gains as importers looked to capture the dip on the dollar-rupee pair, traders said.

Local oil companies bought dollars, while state-run banks were seen on offer, a foreign exchange trader at a private bank said.

U.S. Treasury yields and the dollar retreated after data released Friday signalled the labour market in the world’s largest economy was cooling, cementing hopes that the Federal Reserve is done hiking rates.

The odds of a Fed rate hike at the December meeting are now at 7%, down from 20% a week earlier, according to [FEDWATCH].

The dollar index was last quoted lower at 104.89. The 10-year U.S. bond yield inched up to 4.59% in Asia but was well off its multi-year high of over 5% hit in October.

“We are inclined to think it is still too early to see another large drop in the dollar because the US activity story simply hasn’t deteriorated enough,” ING Bank stated in a note.

Meanwhile, the rupee is likely to stay rangebound in the near-term, with the overall bias tilting towards depreciation, said Gaurang Somaiya, a foreign exchange researcher at Motilal Oswal Financial Services.

Until recently, the rupee “was stabilising on bad news,” so a bit of positive news is unlikely to cause a strong rally, he added.

(Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala)