The rupee was at 83.5275 against the U.S. dollar as of 10:05 a.m. IST, moderately stronger than its previous close at 83.56.
The dollar index was up 0.1% in Asia trading after slumping to a one-month low of 104.07 on Thursday as data showed that headline U.S. consumer prices unexpectedly fell in June, while the core month-on-month consumer price index (CPI) stood at 0.1%.
Odds of a September rate cut by the Fed rose above 90% after the data, according to the CME's FedWatch tool, driving U.S. bond yields lower as well.
There are "decent offers present (on USD/INR) but, as usual, there seems to be sufficient dip-buying interest", a foreign exchange trader at a state-run bank said.
Meanwhile, dollar-rupee forward premiums ticked up with the 1-year implied yield up 2 basis points at 1.68%, its highest in little over a month.
The 1-year U.S. Treasury yield fell to its lowest since early March at 4.89% on Thursday before nudging up in Asia hours.
The rupee "keeps oscillating around 83.50 levels with an overall downside bias, led by a softer dollar and chunky inflows in the domestic market and waiting for the RBI to loosen its grip and let the currency appreciate", said Amit Pabari, managing director at FX advisory firm CR Forex.
The Reserve Bank of India's (RBI) routine interventions have kept the rupee largely rangebound and have driven near-term volatility expectations to near multi-month lows.
Investors now await U.S. producer price inflation data and India's consumer inflation reading due later in the day.
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