US stocks closed mixed on Friday due to a 3 percent decline in oil prices. Oil tumbled USD 1.33, or 3.09 percent, to USD 41.71 a barrel as the dollar index, which hit a fresh eight-month high, added additional pressure to an oversupplied market.
The Indian rupee tumbled in line with its Asian peers due to persistent risk-off sentiment on the back of broad dollar strength.
Paul Mackel, managing director - head of Asian currency research at HSBC, says though the dollar-rupee is high, volatility is low. However, in the near-term, he sees the rupee toughing the 67 per dollar mark.
The ECB's likely cuts come as the US Federal Reserve is widely expected to implement its first hike to its benchmark rate in nine years at its December meeting. That's likely to strengthen the dollar as it will increase expected returns in the US.
The USD-INR pair is expected to trade today in a range of 66.25-66.50/dollar, says Mohan Shenoi of Kotak Mahindra Bank.
"Next week could be one of the most important weeks of the whole year," said Marc Chandler, head of foreign exchange strategy at Brown Brothers Harriman.
ECB President Mario Draghi has hinted that that the bank could look to ramp up or extend its 1 trillion euro (USD 1.1 trillion) quantitative easing (QE) program.
The yield was just under 0.90 in afternoon trading, and analysts say it is in a range that could be stretched in the next few weeks if the Fed's path to rate hikes remains on track. The 2-year last traded at that level more five years ago.
On Indian markets, Dr Robert Baur, chief global economist, Principal Financial Group says the stock market valuations are below average on poor earnings, but the government will continue investing in infrastructure.
The European Central Bank may be about to inadvertently lend Hollande a hand, by increasing its stimulus to the region's economy and even further lowering borrowing costs.
Officials at the US central bank have said they intend to raise rates from near zero gradually, but if the economy heats up, they would feel pressure to rein in prices by increasing the cost of borrowing money.
The rupee resumed higher at 66.18 per dollar as against the 66.31 per dollar the Interbank Foreign Exchange (Forex) market on last Tuesday and firmed up further to 66.1050 per dollar before quoting 66.13 per dollar at 1100 hrs, showing a gain of 18 paise. It moved in a range of 66.11 per dollar and 66.23 per dollar during the morning trades.
The Fed has made clear that it could undertake its first rate hike in more than nine years as soon as December, a move it has repeatedly put off as US and global economic growth has remained tepid.
They are keen to exhaust the conventional and more direct monetary policy tool as they also consider amending the 60-billion-euro asset purchase programme, a far more contentious issue that they have yet to agree on.
According to an RBI statement, the exchange rates for the pound and the yen against the rupee were quoted at 101.12 and 54.17 per 100 yens, respectively, based on reference rates for the dollar and cross-currency quotes at noon.
The Indian rupee opened higher at 65.56 as against yesterday's level of 65.64 at the Interbank Foreign Exchange (Forex) market. It hovered in the range of 65.52 to 65.62 per dollar during the morning deals, before quoting at 65.58 at 1030 hours.
"The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation."
Consumer prices in the 19-country euro zone slipped by 0.1 percent in September - far from the bank's aim of just below 2 percent - prompting calls for the ECB to expand or extend its 60 billion euros a month of asset purchases.
The US Fed kept rates unchanged on Wednesday while explicitly saying it intends to move off its zero rate policy. Speaking about the sudden overt reference to rate revision in December, Ian Hui, Global Market Strategist at JPMorgan Asset Management said he assigns a 45 percent chance of a rate hike in December.
Arvind Sanger of Geosphere Capital Management believes that the measures from the Chinese central bank will lead to easing of the liquidity situation. But Viktor Shvets of Macquarie feels there will a contraction in liquidity from hereon.
The coming week is very important for primary as well as secondary markets. Lots of big companies' earnings, two IPOs and FOMC meeting will keep investors busy throughout the week.
The domestic unit opened sharply higher at 64.77 as against last weekend's level of 64.81 at the Interbank Foreign Exchange (forex) market and firmed up further to 64.73 on initial selling of dollars by banks and exporters in view of persistent foreign capital inflows.
Gold rose 0.6 percent to USD 1,172.64 an ounce, while silver added 0.9 percent to USD 15.98 an ounce.
The Indian unit opened sharply higher at 64.80 as against Wednesday's closing level of 65.12 at the Interbank Foreign Exchange (forex) market. Forex market was closed yesterday for the 'Dussehra' festival.
Annual growth in the euro zone is running at only around 1.2 percent, although there is a large gap between countries.