The rupee recouped early losses but still finished weaker on Monday as the dollar hit a three-week high against the euro after last week's surprising strong US jobs report eased concerns of slowing US growth. But a rally in the local stock market and growing expectations that Chinese authorities will allow a revaluation of the yuan soon saw the rupee bounce back from early lows of 43.5350 per dollar. The partially convertible rupee ended at 43.4825/4875 per dollar, down from Friday's finish of 43.4275/4325 and moved further away from a five-year peak of 43.30 set in early February.
The rupee strengthened 0.24 percent against the dollar last week to come within striking distance of February's five-year high, helped by the yuan speculation and a quarter point rise in India's short-term interest rate to 5.0 percent last month which has led to expectations of increased foreign capital inflows.
"There were some inflows from exporters and long dollar liquidation by banks who had expected the rupee to weaken," said a senior forex dealer at a private sector bank. "The dollar inflows took care of dollar demand from oil companies and the slight weakness caused by the dollar's rise."
The dollar made headway against the European and Asian currencies, aided as well by lack of comment out of China over the weekend on prospects for a possible yuan revaluation.
Asian currencies have been buoyed in recent weeks by speculation China could revalue the yuan and traders said they were waiting for a meeting later in the day between US Treasury and Chinese central bank officials expected to include foreign exchange issues.
Traders said the rupee would draw strength from a recent rally in the stock, which has revived expectations that foreign fund inflows, which had paused in April, may gather pace.
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