Non-deliverable forwards indicate the rupee will open at around 83.06-83.08 to the U.S. dollar compared with 83.1375 in the previous session.
Late on Monday, Bloomberg Index Services proposed including eligible Indian bonds in its emerging market local currency index from September. This follows JPMorgan's decision to include India in its emerging market debt index in June.
Asian currencies were mostly higher and the dollar index was down to 102.12.
The New York Fed's latest Survey of Consumer Expectations showed that projection of inflation over the short run fell to the lowest in nearly three years, supporting expectations of rate cuts and denting demand for the dollar.
The pause in the dollar's rally is "more important in the context of the rupee's open" than Bloomberg's proposal, said a forex trader.
"Right now it is just a proposal and that means any inflows related to it will be months down the line," he said.
The rupee's uptick at open "will likely face decent opposition like yesterday", he said.
The rupee reached a high of 83.0450 on Monday before running into hedging orders by importers, according to traders.
The focus this week is on U.S. inflation data, which, ANZ expects rose 0.2% month-on-month in December. The data, due Thursday, comes amid high expectations of a U.S. rate cut as soon as March.
"We are less optimistic and believe the Fed will be patient, wanting greater certainty before starting a cutting cycle," ANZ said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 83.14; onshore one-month forward premium at 9.5 paise
** Dollar index down at 102.12
** Brent crude futures up 0.4% at $76.4 per barrel
** Ten-year U.S. note yield at 4.02%
** As per NSDL data, foreign investors bought a net $212.7mln worth of Indian shares on Jan. 5
** NSDL data shows foreign investors bought a net $200.2mln worth of Indian bonds on Jan. 5
(Reporting by Nimesh Vora; Editing by Savio D'Souza)
By Nimesh Vora
