On Tuesday, the Indian rupee opened 13 paise higher at 70.73 against the US dollar after some selling in American currency by banks and exporters. The currency markets are tracking the optimism from the progress in the US and China's phase one trade deal that is due to be signed this week.
Sustained by inflows from foreign institutional investors, the rupee gained along with its Asian peers. On Monday, the domestic currency closed 8 paise higher at 70.86/dollar aided by positive global cues and gained in the Indian stock markets.
The dollar, however, fell against its major crosses ahead of the deal signing. The American currency is often a choice in risk-averse situations but as the two biggest economies get ready to sign a deal that could de-escalate their nearly two-year trade spat, investors are moving towards equity and other riskier assets.
The US also reversed its decision to brand China a currency manipulator ahead of the deal.
As for the rupee, market participants will remain cautious after India's retail inflation data for December was released on Monday at 7.35 percent, the highest in over 5 years.
"Today, USDINR pair is expected to quote in the range of 70.50 and 71.20," said brokerage Motilal Oswal Financial Services.
Wholesale inflation data for the month of December is due on Tuesday.