The rupee moved in a narrow 10-paise band to end at 90.65 against its previous close of 90.6350.
The rupee had jumped earlier this month, backed by the optimism from the U.S.-India trade deal, but is back to tracking flow dynamics and external cues.
Dollar sales by exporters and foreign portfolio inflows have helped the currency rise 1.5% so far in February.
However, that support could weaken.
“The rupee is not racing. It is waiting,” said Amit Pabari, managing director at FX advisory firm CR Forex.
From a technical perspective, the 90.00-90.20 zone remains a key support for USD/INR and a gradual move towards 91.00-91.20 remains possible in the near term, he said.Although foreign investors remain net buyers of Indian equities for the month so far, they pulled out more than $800 million on Friday, underscoring that flows remain choppy.
Softer-than-expected U.S. inflation print has bolstered the chances of at least two more rate cuts from the Federal Reserve.
Citi said in a note that the fear of persistent and rapid depreciation of the rupee seems to have been arrested, which should be a positive for equity investors.
Some investors are willing to consider rupee out-performance on a relative basis even if there is no absolute appreciation bias, the brokerage said.
