Indian rupee ends little changed as traders stay cautious despite oil, dollar drop

MUMBAI: The Indian rupee closed nearly flat on Monday, giving up early gains despite lower oil prices and a weaker dollar, as traders stayed cautious ahead of Tuesday’s US midterm elections.

The Indian rupee closed at 94.90 per dollar, little changed from its close at 94.95 in the previous session.

Brent crude oil prices slid over 4% to $108.3 per barrel, the lowest since October 21, on hopes for a deal to end the Iran war.

Iranian negotiators left peace talks in Doha on Sunday. A draft proposal is being circulated for feedback and a follow-up meeting is possible, an official briefed on talks told Reuters.

The dollar index was down about 0.5% as well at 101.5 as investors braced for a packed week dominated by the US midterm elections.

Americans will head to the polls on Tuesday to determine whether Democrats can wrest control of Congress away from US President ​Donald Trump’s Republican Party. The outcome of the elections is expected to influence the path of the Iran war and holds implications for massive investments pouring into AI.

“A damaging defeat for the Republicans could put a dampener on US dollar strength but we don’t expect it to be game changer on its own,” MUFG said in a note.

The lower oil prices and weaker dollar, though, did little to aid the rupee as traders remained cautious about how global factors will shape up. Two Singapore-based traders also pointed to strong dollar-buying appetite in the non-deliverable forward market.

“There is a view in the market that rupee’s gains could be capped around 94.50, especially in light of the RBI’s large forward book which may spur fresh dollar buying by the central bank to refill FX reserves as forward liabilities mature,” a trader at a foreign bank said.

Data released post market hours on Friday showed that Reserve Bank of India’s net short dollar forward position surged to nearly $240 billion in September from $200 billion in August.