CURRENCY OVERVIEW

The Rupee closed at its weakest in a month on Monday as a drop below the 88 per U.S. dollar mark spurred a flight out of long wagers on the currency, while persistent dollar demand from importers also weighed. Frequent interventions by the Reserve Bank of India had helped the rupee hold above the 88 mark last week, but traders also pointed to an easing of that defence on Monday. While state-run banks were spotted offering dollars on the day, the activity was not clustered around any specific level, a trader at a foreign bank said. Analysts at BofA Global Research hold a neutral view on the rupee. Trade uncertainty, including around services, weighs on exports and flows, despite the appealing valuation and weaker USD trend in the final quarter of 2025, they said in a note. The rupee's 40-currency real effective exchange rate (REER), a gauge of its competitiveness, fell to 97.65 in September, the lowest in 7 years. A REER below 100 points to undervaluation. The U.S. dollar weakened against the euro, Chinese yuan and Australian dollar on Monday as optimism over a possible U.S.-China trade deal boosted risk appetite and reduced demand for the greenback. Overall moves in the currency markets were relatively muted as traders also waited on several key central bank meetings this week. The dollar index was last down 0.06% at 98.87, with the euro up 0.13% at $1.164. Central banks may dominate market direction later this week, with the Federal Reserve and Bank of Canada expected to cut rates on Wednesday, while the European Central Bank and Bank of Japan on Thursday are likely to leave rates unchanged. With a 25-basis-point Fed rate cut long priced in, markets will closely watch for any signs that the central bank may be preparing to wind down its quantitative tightening program (QT). The Chinese yuan was also boosted by the People's Bank of China setting the official yuan midpoint rate higher than expected. Prior to the market open, it set the official yuan midpoint rate at 7.0881 per dollar, the strongest since October 15, 2024, and above a Reuters estimate of 7.1146. The Chinese offshore yuan rose to a more than one-month high against the dollar of 7.1015. The Australian dollar was last up 0.55% versus the greenback at $0.6549. The Australian currency was also boosted by relatively hawkish comments from the country's central bank head. The Japanese currency has weakened in recent weeks on concerns that Takaichi will implement more expansionary policies. Against the Japanese yen , the dollar was last up 0.12% at 153.03 yen. Oil prices held steady on Monday as hopes of a trade deal framework between the U.S. and China and renewed U.S. sanctions on Russia offset broader concerns about weak oil demand. Brent crude futures were up about 14 cents, or nearly 0.2%, to $66.08 a barrel at 11:30 a.m. ET (1538 GMT). U.S. West Texas Intermediate crude futures were up 22 cents or 0.4%, to $61.74. Both contracts fell around 1% in early trade.