The rupee was at 83.5350 to the U.S. dollar at 11:12 a.m. IST, having risen to 83.4625 immediately after open. It closed at 83.5325 on Friday.
"You will see this kind of choppy move all through the week. The bias (on dollar/rupee) is slightly lower," a currency trader at a bank said, noting that inflows will be taking place against the backdrop of a broadly higher dollar.
India's inclusion in the widely tracked JPMorgan emerging market debt index is expected to spur passive inflows of about USD 2 billion around June 28.
However, the impact of inflows into the rupee will be muted by a drop in major Asian currencies like the yuan and the yen. The yen is back to the near 160 handle versus the dollar, a level that previously prompted authorities to intervene.
Japan is always ready to take action against excessive market moves, Tokyo's top currency diplomat said on Monday.
The offshore yuan declined to 7.2950 to the U.S. dollar, the lowest since November.
Expectations that the Federal Reserve will not be cutting rates in a hurry and data that indicated robust U.S. business activity boosted the dollar against the major Asian currencies.
The U.S. business activity inched up to a 26-month high in June.
This is "adding to the narrative of a still largely resilient US economy", MUFG Bank said in a note.
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