The rupee closed at 85.6025 against the U.S. dollar, nearly unchanged from its close of 85.62 in the previous session.
The currency hovered in the range of 85.6725-85.52 on the day, the narrowest since April 22.
The dollar index was a tad higher at 99 while most Asian currencies treaded water. The offshore Chinese yuan, meanwhile, slipped to 7.1873 as investors adopted a cautious approach ahead of the outcome of ongoing U.S.-China trade talks.
Top U.S. and Chinese officials will resume negotiations for a second day in London later in the day, with talks over export controls for goods such as rare earths in focus.
Worries over uncertain U.S. trade policies have weighed on the dollar this year, leaving it nursing losses of over 8% against major peers. “Any good news is probably a dollar positive in the current environment,” ING Bank said in a note, referring to the ongoing U.S.-China talks. While currencies such as the Taiwan dollar and South Korea’s won have benefited from the dollar’s drop, analysts have pointed out that India’s external investment deficit remains a hurdle for the rupee.
Traders expect the rupee to continue hovering in the 85-86 range in the near term, with portfolio flows or developments surrounding India’s trade negotiations expected to be catalysts that could prompt the currency to stray away from the range.
India’s benchmark equity indexes, meanwhile, were little changed on the day as well, while the benchmark 10-year bond yield edged up to 6.29%.
Investors now await the release of U.S. consumer price inflation (CPI) data due on Wednesday. The data is expected to influence expectations of the future trajectory of Federal Reserve policy rates.
