The U.S. dollar, which rallied in the previous session on mounting worries over China's COVID situation, pared some of its overnight gains and moved broadly lower.
Spot gold was down 0.2% at $1,752.66 per ounce, as of 0016 GMT. U.S. gold futures fell 0.1% to $1,751.80.
Recovery in domestic equities and stronger Asian currencies also supported the rupee.
Spot gold rose 0.3% to $1,743.07 per ounce by 0215 GMT. U.S. gold futures gained 0.3% to $1,744.50.
China is battling numerous COVID flare ups. Two deaths were reported in Beijing on Sunday, and the city’s most populous district urged residents to stay at home on Monday.
Spot gold fell 0.3% to $1,744.38 per ounce by 0217 GMT. U.S. gold futures shed 0.5% to $1,746.30.
DBS Bank’s forecast for the rupee was that the currency would range between 81 and 82.30 per dollar in October-December. The price “has played out along expectations,” senior economist Radhika Rao has told Moneycontrol
Renewed expectations the Fed will keep hiking rates have increased concerns about the economic outlook. The U.S. Treasury yield curve remained deeply inverted in Tokyo trading, suggesting investors are bracing for recession.
The rupee, on the back of the softer-than-expected U.S. inflation data, hit a seven-week high of 80.52 per dollar on Monday. That is a more than 3% recovery from the record low of 83.29 it touched around mid-last month.
Spot gold slipped 0.5% to $1,761.86 per ounce, as of 0239 GMT, after hitting its highest since Aug. 18 on Friday. U.S. gold futures eased 0.3% to $1,764.80.
The dollar fell sharply on Thursday after U.S. consumer prices rose less than expected last month and data pointed to underlying inflation having peaked, opening the way for the Federal Reserve to slow its aggressive interest rate hikes.
The yuan had its best day in two years on Friday and managed to hold most of its gains through a choppy Monday. It was firm at 7.2200 per dollar in offshore trade on Tuesday.
The USD/INR forward premiums have tumbled this year, fuelled by a jump in Treasury yields. U.S. yields have surged in the wake of aggressive rate hikes by the Federal Reserve.
Against the weakening dollar, the euro and sterling edged up to $0.9889 and $1.1494, respectively.
Investors widely expect the Fed this week to raise its benchmark overnight interest rate by 75 basis points (bps) to a range of 3.75% to 4.00%, the fourth such increase in a row.
The rupee pared its initial gains and settled 34 paise lower at 82.81 against the US dollar on Monday
A slew of US data on manufacturing, home prices and consumer confidence have all fallen short of economist estimates, underscoring the toll of Fed tightening
International benchmark Brent crude futures gained 27 cents to $93.53 per barrel by 0415 GMT, after falling 0.3 per cent in the previous session.
Spot gold held its ground at $1,656.09 per ounce, as of 0113 GMT. Prices marked their biggest one-day percentage gain since Oct. 3 on Friday, following a report that some Fed officials are signalling greater unease with oversized rate hikes.
The dollar had started in a bullish mood with an early rush up to 149.70 yen, only to retreat as far as 145.28 in a matter of minutes. The dollar was last up 0.5% at 148.36 amid some wild swings.
The dollar index, which measures the greenback's strength against a basket of currencies, was 0.2% higher at 113.2, down from a 3-week high of 113.95, hit earlier in the session.
The rupee breached the 83 per dollar mark in a dramatic fashion on Wednesday, once the Reserve Bank of India stopped protecting it at 82.40 levels.
The rupee slipped to a record low of 83.2150 on Thursday. It is likely to fall further to 84.50 by December, according to the mean and median forecasts of a poll of 14 bankers and foreign exchange advisors.
Spot gold inched down 0.1% to $1,627.04 per ounce, as of 0049 GMT. Prices earlier hit their lowest level since Sept. 28 at $1,624.98.
The U.S. dollar held at a 32-year peak against the yen and rose from a two-week trough against a basket of major peers, underpinned by expectations of aggressive U.S. Federal Reserve interest rate hikes.