The rupee ended at 85.5350 against the U.S. dollar, down marginally from its close of 85.5325 in the previous session.
While the local unit touched a peak of 85.44 during the session, it surrendered its gains in the latter half of the day in the face of broad-based dollar bids from banks and as its regional peers declined, traders said.
On the day, Asian currencies were mostly lower while the dollar index gained 0.1% to 108.1. The offshore Chinese yuan was down 0.2% at 7.31, pulled down by rising U.S. bond yields.
The dollar-rupee pair is “is expected to remain in a range of 85.30-85.60 with dips to be bought,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors said.
The rupee’s near-dated volatility expectations also rose on Monday, with the 1-month implied volatility touching a more-than-16-month peak of 3.7%. This came on the back of rising expectations of the Reserve Bank of India loosening its hold on the rupee in 2025 as the currency is at its strongest against peers in at least two decades in trade-weighted terms. A popular options trading strategy points to a growing bearish bias on the rupee versus the dollar in the face of multiple headwinds such as the anticipation of higher-for-longer Federal Reserve policy rates, tepid capital inflows, and the risk of global trade tariffs under incoming U.S. President Donald Trump.
The 1-month dollar/rupee risk reversal has risen to 0.4, the highest since August 2024. A rise in the risk-reversal signals that investors are willing to pay more to bet on the rupee’s fall than its rise.
