The rupee closed at 85.62 against the U.S. dollar. It had closed at 85.6250 in the previous session.
Dollar-rupee forward premiums, meanwhile, eased to multi-month lows, with analysts pointing out that a fall in forward premiums could leave the currency vulnerable to further depreciation.
The dollar index was down 0.2% at 98.9 while most Asian currencies tiptoed higher.
Top U.S. and Chinese trade officials will meet for a second round of talks on Monday, days after Presidents Trump and Xi held a call to address escalating trade tensions.
The scheduled talks “should keep the risk environment calm and the dollar supported,” ING Bank said in a note. “With a speculative market already short dollars, (the dollar index) could drift towards the 99.40/50 area in anticipation of some good news out of U.S.-China trade discussions,” the note added. Worries about the economic impact of U.S. trade policies have continued to weigh on the dollar, which is down by around 8.5% against major peers over the year so far.
The rupee, meanwhile, is little changed on the year even as its regional peers have benefited from a broadly weaker dollar.
Weak capital flows alongside relatively muted demand to hedge against prospective weakness in the dollar has held back the rupee, analysts said.
Foreign investors have sold about $11.6 billion of Indian stocks over the year on a net basis so far.
On the day, India’s benchmark equity indexes, the BSE Sensex and Nifty 50 both ended in the green, lifted by the central bank’s bumper monetary policy measures and signs of progress in U.S. tariff negotiations with its key trading partners.
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