The rupee steadied on Monday after rising early, tracking the domestic sharemarket and some dollar inflows, but traders expected it to remain range bound during the day.
At 11:15 a.m. (0545 GMT), the partially convertible rupee was at 45.5550/5600 per dollar, after rising to 45.5350 in early deals. It had ended at 45.60/61 per dollar on Friday.
Despite weak fundamentals (shaky equity markets, higher oil prices) the rupee couldn't weaken beyond 46...positioning in fact favors a bit of rupee appreciation in the short run, said Ananth Narayan G, head of fixed income, currencies and commodities at Standard Chartered Bank.
Indian shares were trading 0.2 percent higher on Monday, but trading was choppy with investors watching foreign funds for direction.
U.S. crude futures edged above $89.05 a barrel on Monday, recovering from a near 2 percent drop in the previous session, supported by the political crisis in Egypt and a drop in the U.S. unemployment rate to a 21-month low.
Oil is India's biggest import and refiners are the largest buyers of dollars in the domestic currency market.
Dealers said they expect the rupee to move in a range of 45.45-45.65 during the day.
Traders said some dollar inflows could support the local unit.
Foreign institutional investors bought Indian shares worth $145.04 million on Thursday, after being net sellers in the previous five sessions. They have pulled out $1.35 billion this year until Feb. 3, on concerns over high inflation.
The euro recovered a tad on Monday on Asian buying after lunar new year holidays, though it remained on shaky ground after a jump in U.S. Treasury yields undermined its yield advantage.
The dollar index, a measure of the greenback's performance against six major currencies, was down 0.17 percent at 77.912 points, but well off a three-month low of 76.881 plumbed on Wednesday.
One-month offshore non-deliverable forward contracts were quoted at 45.77, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and the MCX-SX and the United Stock Exchange were all at 45.7350, with the total traded volume at $1.0 billion.