The Indian rupee was little changed on Monday as weak local shares offset the positive sentiment after a government advisory panel proposed defering the implementation of a controversial set of rules on tax avoidance until 2016.
The rupee rose to its highest in more than a week in opening trades on the back of the GAAR deferment proposal. However, shares gave up gains to close weaker on the day, dragging the rupee off its peak.
The pair was stuck in a range of 55.41 to 55.60 per dollar as trading activity was muted as U.S. markets were closed for the Labor Day holiday.
"It is a U.S. holiday so our market was very dull. Bernanke's speech at Jackson Hole didn't have any clear message on any policy matters, so not much impact on the USD/INR," said Uday Bhatt, a dealer with UCO Bank.
"I think the rupee would continue to be range-bound between 55.30 to 55.80 per dollar this week," he added.
Federal Reserve Chairman Ben Bernanke on Friday left the door wide open to a further easing of monetary policy, saying the stagnation in the U.S. labor market was a "grave concern," but he stopped short of providing a clear signal of imminent action.
The partially convertible rupee closed at 55.53/54 per dollar, as per the SBI closing rate, little weaker compared to its previous close of 55.52/53.
Shares fell as investors discounted deferment of proposed anti-tax avoidance rules, choosing to concentrate on macroeconomic woes like the fiscal and trade deficits.
The one-month offshore non-deliverable forward contracts were quoted at 55.80, while the three-month was at 56.42.
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 all closed at around 55.70, with a total traded volume of around $3.4 billion.