Aditi Nayar, Chief Economist, ICRA, said the rupee is likely to remain dominated by trends in the dollar index and global sentiment, with the latter likely to keenly guide trends in FPI flows.
After investing over Rs 36,200 crore last month, foreign investors continued their positive momentum and have injected a net Rs 10,555 crore in Indian equities so far in December amid stabilisation in oil prices and moderating US inflation.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.18 per cent to 104.53.
In the face of a sluggish trend in domestic stocks and ongoing foreign capital outflows, the rupee erased earlier gains to settle just 1 paisa higher at 78.09 (provisional) against the US dollar on Friday.
At the interbank foreign exchange, the rupee opened strong at 78.03 against the US dollar, then inched lower to quote 78.04, registering a rise of 6 paise over the last close.
Global oil benchmark Brent crude futures slipped 0.94 percent to USD 106.13 per barrel
It was a story of flip-flops, says Udayan Mukherjee, managing editor of CNBC-TV18, summerising the market movement for the day.
The rupee is expected to tread water early on Tuesday as investors await the election results in Uttar Pradesh.
Imran Zaheer Ahmad, FX Strategy & Research Head, RBS Global Banking & Markets expects the rupee to strengthen against the dollar to around 44 levels in the coming weeks. “I think there will be further gains in the INR in the weeks ahead, at least, until the next LTRO at the end of February,” he said.
Moses Harding of IndusInd Bank spoke to CNBC-TV18 about the push seen on the rupee-front today.