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

Mumbai saw the Indian rupee end flat on Monday, unimpressed by a decline in oil prices and a drop in the dollar's value despite the caution of traders ahead of the upcoming US midterm elections on Tuesday. The rupee settled at 94.90 per dollar, barely moving from the previous day's close of 94.95. Brent crude oil prices plummeted by more than 4%, plummeting to $108.3 per barrel, its lowest since October 21, following hopes for a deal to end the conflict in Iran.

Iranian negotiators exited peace talks in Doha on Sunday, leaving a draft proposal open for feedback, with a potential follow-up meeting. The dollar index also dipped by around 0.5% to 101.5 as investors prepared for a busy week centered on the US midterm elections. Americans would go to the polls on Tuesday to decide whether Democrats could snatch control of Congress from President Donald Trump's Republican Party.

The outcome of these elections is anticipated to impact the course of the Iran war and could have significant implications for the substantial investments flowing into AI. While a Republican defeat might dampen the US dollar's strength, experts believe it wouldn't be enough to reverse the currency's trajectory. The lower oil prices and weaker dollar, however, proved insufficient to bolster the rupee as traders remained wary of how global developments would unfold.

Two traders from Singapore also noted a strong appetite for dollar buying in the non-deliverable forward market. "There is a view in the market that rupee's gains could be capped around 94.50, especially with the RBI's sizable forward book, which could prompt more dollar buying by the central bank to replenish foreign exchange reserves as forward liabilities mature," a trader at a foreign bank commented.

Post-market data from Friday revealed that Reserve Bank of India's net short dollar forward position had skyrocketed to nearly $240 billion in September, up from $200 billion in August.