By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee nudged higher in early trading on Monday, aided by improved risk appetite, but gains were restricted by dollar demand related to importers’ month-end payments and from foreign banks.
The rupee was at 86.4675 against the U.S. dollar as of 10:20 a.m. IST, up slightly from its close at 86.5150 in the previous session.
The local currency has weakened about 0.8% over July so far, hit by outflows from local equities alongside uncertainty about the timing of a U.S.-India trade deal, even as economies such as the European Union, Japan, Indonesia and Vietnam secured deals.
Over the weekend, the U.S. struck a framework trade agreement with the EU, imposing a 15% import tariff on most EU goods.
The EU also plans to invest some $600 billion in the United States and dramatically increase its purchases of U.S. energy and military equipment, President Donald Trump said on Sunday.
The euro strengthened slightly against the dollar after the deal was announced. Meanwhile, the dollar index was little changed at 97.6 on the day while Asian currencies were trading mixed.
The rupee is likely to hold an 86.38-86.57 range on Monday and trade with a slight depreciation bias, a trader at a state-run bank said.
India’s benchmark equity indexes, the BSE Sensex and Nifty 50, nudged higher on Monday but are nursing losses of over 2.5% each on the month so far, troubled by tepid quarterly earnings and foreign portfolio outflows.
A lack of strong foreign inflows, the Reserve Bank of India’s ongoing unwinding of short forward dollar positions, and a quiet return to FX reserve accumulation have all weighed on the rupee, said Amit Pabari, managing director at FX advisory firm CR Forex.
(Reporting by Jaspreet Kalra; Editing by Eileen Soreng)
