The Indian rupee lumbered in a thin band before ending modestly weaker on Monday as a decline in local stocks eroded the boost to market sentiment from gains in Asian currencies after the U.S. and Iran agreed to halt recent hostilities.
The rupee settled at 94.54 per dollar, down 0.1% from its previous close at 94.3950.
Tehran and Washington agreed to renew talks regarding their dispute over the Strait of Hormuz, per a U.S. official, raising hopes that they may save an interim peace deal that was under pressure from days of tit-for-tat strikes.
Brent crude oil prices were up about 1% at $72.6, well below a multi-year peak of $126 hit in late April. Asian currencies were mostly up between 0.1% to 0.4% versus the dollar.
Weakness in Indian stocks though weighed on the rupee with the benchmark Nifty 50 stock index falling 0.4%, sidestepping gains in regional equities.
Traders pointed to a pick up in dollar demand from foreign banks in the latter half of the session, most likely on behalf of custodial clients.
"With the pair not sticking to any one direction at the moment, short-tenor positions with tight stop-losses are preferable," a trader at a Mumbai based bank said.
Elsewhere, the dollar index was a tad lower but perched near its highest level in over a year, with investors keeping a close track of evolving expectations around rate increases by the U.S. Federal Reserve later this year.
Investors are pricing in at least one Fed hike in 2026, a sharp reversal from expectations of two rate cuts before the Iran war began. The focus this week will be a key U.S. jobs report due on Thursday.
"Any signs of US growth and job creation accelerating - despite the negative impact of AI already seen on finance and IT sector jobs - would set the stage for a rate hike," said analysts at Standard Chartered.
