Market participants had noticed trade execution issues on the interbank order matching system during early trading, which were subsequently resolved, boosting trading volumes.In the second half of the session, traders observed two-sided business activity alongside demand for dollars from some foreign banks.
Traders expect the rupee to hover between 90 and 91 per dollar in the near term as they look for a sustained recovery in foreign portfolio flows and export hedging, which could allow the rupee to extend its gains, spurred by the announcement of a US-India trade deal last week.
The day’s minor hurdles prevented the rupee from benefiting from a 0.2% decline in the dollar index, while most Asian peers posted gains.
The yen strengthened on Monday after Japanese Prime Minister Sanae Takaichi emerged victorious in Sunday’s election, while the Thai baht also rose sharply after an election result. “Barring a significant deterioration in risk appetite, it appears we could be in for a down week for the dollar,” analysts at ING said in a note.
The MSCI index for Asian shares rose more than 2%, while the Indian equity benchmarks, the BSE Sensex and Nifty 50, also rose 0.6% and 0.7% respectively.
However, pressure on Indian bond markets continued, with the yield on the 10-year benchmark crossing 6.75% on concerns over the oversupply of sovereign debt and deteriorating sentiment due to the lack of additional measures to provide liquidity support by the central bank in its monetary policy announcement last week.
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