The Indian rupee rose about 1% on Monday after the central bank ‌took steps to temper dollar demand in spot and derivatives markets, with likely intervention through dollar sales adding to the gains. The rupee rose 1% to 95.77 per dollar from 96.73 on Friday, outperforming mostly rangebound Asian peers and posting its best single day gain since April, which had also been sparked a set of measures to shore up the unit. India announced new steps new steps on Saturday after the rupee neared its record low of 96.96 per dollar last week. The changes involve redirecting oil companies' dollar purchases away from the spot market and tightening hedging rules as the currency hovers near record lows. Banks turned cautious about offering forward dollar hedges to importers on Monday after the Reserve Bank of India's latest forex measures sharply raised costs and are expected to slow a hedging surge that had dragged the currency. Expectations of longer-term weakness pushed importers to step up purchases of forward dollars to  record levels last month. That ‌hedging demand, in turn, added strain on the currency, creating a cycle of depreciation expectations, increased hedging and further weakness in the rupee. While the rupee has rallied sharply in the aftermath of the RBI's measures, the sustainability of the recovery will depend on whether underlying pressures ?subside. On Monday, the rally encountered one of its first hurdles when sharp rupee gains drew hedging-related flows into the non-deliverable forward market. The dollar traded around its highest in a year and a half on Monday, as an escalating Middle East conflict kept investors wary ahead of key US inflation data later this ‌week that could shape the outlook for interest rates. Oil prices were volatile after Yemen's Iran-backed Houthis stepped up strikes on Saudi Arabia, and two tankers were attacked over the weekend. The dollar traded around its highest in a year and a half on Monday, as an escalating Middle East conflict kept investors wary ahead of key US inflation data later this ‌week that could shape the outlook for interest rates. Wednesday's US consumer inflation report, one of the last major economic releases before the Federal Reserve's policy meeting this month, could be critical in determining the near-term direction of the dollar. Traders are pricing in an 81% chance of the Fed standing pat this month, up from 51% a month earlier. The euro fell 0.22% to $1.1176, after clocking a fifth straight week of losses last week, on the back of investor angst around France's fiscal health before the 2027 presidential election. The spread between French 10-year yields and relatively safe German yields traded at 140 basis points. Last week it neared 160 bps, the most since 2012. The pound held steady against the dollar on Monday, ahead of public appearances by a number of Bank of England officials, while investor wariness over developments in the Middle East kept volatility in check.  The pound was last flat at $1.324, but strengthened against the euro , which fell 0.14% to a low of 84.49 pence, matching last week's 16-month trough, as concern mounted about the risk to the broader euro zone from the intense pressure on French bonds . Against the yen , the US dollar was a touch higher on the day at 158.61 yen in holiday-thinned trading in Japan, while the pound held steady at $1.323.The oil price reversed earlier losses and rose above $105 a barrel after ‌attacks on Saudi Arabia and uncertainty over comments from US President Donald Trump over an energy ceasefire between Ukraine and Russia that surprised Ukrainian President Volodymyr Zelenskiy and on which Russia declined to comment.  Gold prices fell on Monday after hitting a one-week high earlier in the session, as ‌a firm dollar weighed on bullion and investors braced for US inflation data that could reshape expectations for the Federal Reserve's rate path. Spot gold slipped 0.5% to $4,171.18 per ounce by 1132 GMT, having hit its highest level since October 2 earlier in the session. US gold futures for December delivery dropped 0.5% to $4,195.50 per ounce. Among other metals, spot silver fell 0.3% to $60.62 per ounce, platinum slipped 0.2% to $1,690.90 per ounce and palladium rose 0.6% at $1,154.21 per ounce.

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