Rupee Rises on Portfolio Flows but Importer Demand, Asia FX Cap Gains

 The Indian rupee firmed slightly on Monday, aided by likely portfolio flows into stocks but sustained dollar demand from importers and weakness in regional currencies kept a lid on gains.

The rupee was at 88.62 per dollar as of 12 noon IST, up 0.1% on the day, within the 88.50 to 88.80 range that has held over the last four trading sessions.

Dollar sales from foreign banks boosted the rupee early in the session but since then demand from importers has picked up, a trader at a Mumbai-based bank said.

Asian currencies were down between 0.1% and 0.6% while the dollar index was a tad higher at 99.5, as investors braced for the release of a slew of economic data following the end of the U.S. government shutdown.

U.S. economic data will be in focus for cues on the future path of Federal Reserve's policy rates. Hawkish commentary from Fed policymakers has tempered hopes for a rate cut next month.

Money markets are currently pricing in a less than 44% chance of a 25 basis point cut in December, down from over 90% a month earlier. In addition to the data, remarks from a slew of Fed policymakers through the week will be closely watched for signals on rate policy.

"The latter will be helpful in understanding not only how divided the Federal Open Market Committee is, but also how much fog its members see and what the impact of the shutdown will be," analysts at HSBC said in a note.

Ongoing U.S.-India trade negotiations remain a focal point for the rupee.

Traders await India's merchandise trade data for October later in the day to gauge how steep tariffs have impacted the country's exports.