Non-deliverable forwards indicate rupee will open at 83.33-83.36 to the U.S. dollar compared with 83.3350 on Friday. Indian financial markets were closed on Monday.
The rupee, which had been holding a narrow range around 83.50, managed a rally in the afternoon session on Friday. Dollar offers from public sector banks, small stop losses were among the reasons cited for the move higher.
"I doubt there will be a follow through to the mini break down (on USD/INR on Friday), taking into account how Asia is," a currency trader at a bank said.
"And anyway, you expect the dip-buying importers to step in."
Asian currencies declined on Tuesday with the offshore Chinese yuan dipping to near 7.25 to the dollar and the Japanese yen slipping to 156.50. Other currencies were down between 0.4% and 0.7% while the dollar index inched up to 104.68.
The dollar index and U.S. Treasury yields have recovered a large part of their decline that was triggered by the softer-than-expected U.S. inflation data. The expectations on the extent of rate cuts the Federal Reserve will deliver this year are back to what it was before the inflation data.
Fed speakers continued to reinforce that they were cautious about inflation and policy rates. Fed Vice Chair Philip Jefferson said that while the last inflation data was encouraging, it is too early to tell if the recent inflation slowdown will last.
Reflecting the cautious Fedspeak, the dollar has firmed up, ANZ Bank said in a note.
The minutes of the May Fed meeting will be released this week and will shed further light on the anxiety over the higher inflation readings in the first quarter, it said.
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