USD/INR closed at 72.8900 against its open at 72.72. Dollar closed higher Monday on buying by foreign banks tracking a sharp surge in the greenback amid fears of a rebound in oil prices.Dollar is traded strong pushing the spot up and foreign banks remained on the buy-side. Also OPEC decision to cut oil production by 1mpd in 2019 decreased appreciation bias on rupee and aggravated the crude conundrum.
The greenback rose towards as 16-month high on Monday as traders expect the US Federal Reserve to keep tightening monetary policy.
Dollar index, which weighs greenback against a basket of six major currencies, traded at 96.98 Monday compared to 96.79 at close of Indian market on Friday.
The Fed after keeping interest rate unchanged hinted of hiking rate by 25 basis points in December given the rise in wages and stronger economy. At the latest policy, the Fed also hinted of two more rate hikes by mid-2019.
Dollar demand also increased as globally investors moved into the safety provided by the greenback due to the ongoing Sino-US trade conflict, Italy's budget-related showdown with European Union, slowdown in Chinese economy, and uncertainty regarding Brexit.
Also, talks of OPEC and other large oil producers, including Russia planning to cut supplies next year due to a predicted glut of oil on world markets pushed the dollar demand further higher.
Several oil producing countries, including Saudi Arabia and Russia gathered in Abu Dhabi ON Nov 11 to discuss if they should cut production by 1 million barrels a day in 2019, according to the Wall Street Journal. Saudi Arabia said it will reduce its oil supply.
Sensex closed at 34,812.99, while the Nifty closed at 10,482.2.