Rupee's forex boost fades fast, may trade at 96 levels

State-run banks were seen offering dollars on Monday, likely on behalf of the Reserve Bank of India. The intervention was lighter than in previous weeks, according to two dealers. That left the rupee more exposed to underlying dollar demand from importers and oil companies.

The 96 level is the next threshold for the currency, traders said. A break below that would open a path toward 96.50, a level not seen since the April lows. The RBI has defended the 96 handle in the past with spot and forward intervention. The pace of reserve drawdown has made that harder to sustain.

The rupee's near-term direction depends on the dollar's path and the scale of portfolio flows through the rest of the month. The next big test comes with the U.S. payrolls data on Friday, which will set the tone for the dollar across emerging markets. For ongoing forex market analysis, visit forex market analysis.