The rupee appreciated by 34 paise to close at 71.56 against the dollar on Monday. The gain of around 0.5 per cent in the currency came amid strong gains in domestic equity markets, after release of positive trade data by the goverment. Weakness in the dollar against major peers overseas also boosted the currency, say analysts. The rupee opened at 71.84 against the dollar and rose by as much as 39 paise to hit 71.51 during the session. However, it gave up some of those gains to settle at 71.56 for the day.
The country's trade deficit narrowed to $16.67 billion in November 2018, from $17.13 billion in the previous month, data from the Commerce and Industry Ministry showed last week.
The dollar index - which measures the greenback against six major peers - fell 0.07 per cent to 97.371, close to the 19-month high of 97.711 hit last week.
Crude oil prices prices steadied after slipping by around 2 per cent last week, but remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand. Brent - the global benchmark for crude oil - edged up to trade at $60-a-barrel levels.
Analysts will closely watch the outcome of the Federal Reserve's meeting later this week.
"Markets are now pricing in barely one hike by the Fed in 2019. We could see the realised volatility cool off further as we head into year end," said forex advisory firm IFA Global.
The US central bank's Federal Open Market Committee (FOMC) is expected to deliver its fourth rate hike of the year in its policy statement due on Thursday.
Domestic equity markets closed higher for a fifth consecutive session. The Sensex ended 307 points higher at 36,270 on Monday, while the Nifty settled at 10,888, up 82 points from the previous close.
The rupee is down around 12 per cent against the dollar so far this calendar year.
(With agency inputs)
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