By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee was modestly stronger on Monday, aided by mild dollar sales from foreign banks, while its near-tenor implied volatility rose to a two-year peak as traders gauged the impact of equity inflows picking up despite heightened geopolitical uncertainty.
The rupee was at 85.26 against the U.S. dollar as of 11:00 a.m. IST, up from its close at 85.45 in the previous session.
Asian currencies were mostly weaker even as the dollar slipped against major peers. The offshore Chinese yuan declined to 7.29 per U.S. dollar.
Routine dollar bids are present but the daily fix is quoting “nearly at par”, suggesting that there isn’t a significant mismatch in the demand to buy and sell dollars at the daily reference rate, the trader added.
Meanwhile, the dollar-rupee pair’s 1-month implied volatility rose to 5.2%, its highest since March 2023.
The rupee “is expected to remain volatile,” said Amit Pabari, managing director at FX advisory firm CR Forex.
Rising foreign exchange reserves and portfolio inflows offer support to the rupee but persistent geopolitical tensions could cap any meaningful appreciation, Pabari added.
India’s foreign exchange reserves rose to a six-month high of $686.15 billion as of April 18, per central bank data released on Friday.
Foreign buying of Indian stocks has also picked up, with overseas investors lapping up over $2 billion of local equities last week.
On the day, benchmark Indian equity indexes, the BSE Sensex and Nifty 50 were both up nearly 1% each, tracking the gains of most of their regional counterparts.
A raft of U.S. economic data will be in focus this week as investors gauge the impact of shifting trade policies while keeping an eye on country-specific trade negotiations.
(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)
