The rupee opened almost flat on July 15 the dollar held near a three-week high, with traders awaiting the release of US inflation data to offer clues to the monetary policy path.
The currency opened at 85.97 against the dollar after closing the previous session at 85.99.
The dollar index, which measures the American currency against a basket of six other currencies, was trading at 98.043. It had ended the previous session at 98.081.
"Traders remain cautious ahead of the inflation data release scheduled for Tuesday," said Dilip Parmar, senior research analyst, HDFC Securities.
The dollar was also buoyed by the high treasury yields, with investors weighing a potential exit of Jerome Powell from the Federal Reserve, as President Donald Trump continued his criticism of the chairman, Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said.
India's easing retail inflation will give some relief to the local currency. Retail inflation cooled to a 77-month low of 2.1 percent in June, down from 2.8 percent in the previous month, driven largely by falling food prices, government data released on July 14 showed.
The drop mirrors trends in wholesale inflation, which declined to a near two-year low of -0.13 percent in June.
"India's inflation cools to 2.1 percent in June, extending slide to more than six-year lows. Russia faces fresh economic pressure as NATO and the US ramp up military and trade actions. Key inflation metrics for both the US and the UK still lie ahead. For USDINR, 85.80 acts as a support while 86.25 as resistance," Kunal Sodhani, head of treasury at Shinhan Bank said.
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