Non-deliverable forwards indicate the rupee will open nearly flat to the U.S. dollar from 83.47 in the previous session.
The local currency reached a low of 83.50 on Monday amid possible outflows and dollar buying by importers.
"Yesterday's move was surprising and does lend a bit of upward bias (to USD/INR)," an FX trader said. "However, we have seen several times in recent past that momentum means little when you have Reserve Bank of India (RBI) around."
The RBI will "in all likelihood" not want the rupee to slip below the all-time low of 83.5750, a trader at a different bank said.
"For today, you keep one eye on yen and yuan and the other on RBI."
The Japanese yen was down to 156.80 in Asia following a highly volatile session on Monday. The currency hit a 34-year low of 160.245 on Monday, prompting a yen-buying intervention by Japanese authorities. The yuan had recovered alongside the yen.
Japanese authorities haven't confirmed that they had stepped into the currency market in support of the yen.
The choppy moves in the yen come before the Federal Reserve's policy decision on Wednesday. The U.S. central bank is widely expected to keep the policy rate unchanged amid high inflation and robust growth.
Expectations over the U.S. interest rate path have changed considerably. Investors are now pricing in only 35 basis points of rate cuts this year, compared to 150-175 bps of cuts at the beginning of the year.
"The upside inflation surprise over the last three months has delayed the first cut and narrowed the path for the Fed to cut at all this year," Goldman Sachs said in a note.
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