The Indian rupee strengthened on Monday, encouraged by the government's move to ease restrictions on foreign investments in debt markets and the global risk-on sentiment, but gains were pared on worries over political uncertainty. The currency benefited from expectations of additional foreign inflows after the government eased restrictions for foreign investors in domestic debt.
"The sentiment for the rupee is negative at the moment, considering the political uncertainty coupled with euro problems," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank. The partially convertible rupee closed at 54.175/185 per dollar versus 54.33/34 on Friday, after touching 54.06, its highest level since March 19. In the offshore non-deliverable forwards, the one-month contract was at 54.58 while the three-month was at 55.17. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange closed at around 54.58 with a total traded volume of $4.2 billion.