Rupee flattened amid soft dollar and corporate hedging

The Indian rupee closed almost flat on Monday, amid a broadly weaker dollar and steady hedging demand from domestic companies, while optimism over US-India trade talks lent some support to market sentiment. The rupee closed at 90.1525 per dollar, little changed from 90.1625 in the previous session.

The dollar fell against major peers amid renewed concerns about the independence of the US Federal Reserve, but traders said sustained corporate demand for the dollar could keep the rupee from easing.

The greenback was last down 0.4% at 98.8 against a basket of peers, while gold hit a record high of $4,600 an ounce, also buoyed by investor concerns over geopolitical tensions surrounding Iran.

“Downside risks to the dollar are significant from any signs of further determination to interfere with the Fed’s independence. Again, the bond market will be the most important barometer,” analysts at ING said in a note.

The 10-year US Treasury yield was up nearly 3 basis points at 4.198% while US equity futures pointed to a weak start for Wall Street. Meanwhile, India’s benchmark equity index, BSE Sensex and Nifty 50, eased after concerns over trade talks with the US eased, Washington’s new ambassador to New Delhi said the two countries would discuss trade issues on January 13.

India will be invited to join Pax Silica next month, Sergio Gore said, referring to the US-led initiative to build the silicon supply chain from critical minerals to semiconductors and AI.

So far the failure to strike a deal with the US has continued to drag on the rupee and has also reduced foreign portfolio inflows into Indian assets. Foreign investors have sold more than $1 billion in net domestic stocks so far in January, adding to outflows of about $19 billion last year.