MUMBAI: Indian rupee nudged higher on Monday as shares climbed on hopes an improvement in the recent US jobs and manufacturing data will bolster global risk appetite and help capital flows into emerging markets.
Volume was light because of holidays in the United States, Europe and some Asian markets. Banks are also expected to avoid big positions before they close their books for the quarter, traders said.
At 10 a.m. (0430 GMT), the rupee was at 52.88/89 to the dollar, slightly stronger than Friday's close of 52.9600/9675.
"The bias is likely to be towards dollar selling and outflows will be very low given the holidays in United States and many major Asian markets," said a senior foreign exchange dealer at a private-sector bank.
Traders said a likely dollar swap arrangement by the Japanese government with India could underpin the rupee in the long run.
The Japanese government is considering a dollar swap deal with India to provide emergency liquidity in case the European debt crisis reaches emerging economies, the Nikkei business newspaper said on Sunday.
The rupee, which hit a record low of 54.30 on Dec. 15, could face downward pressure if oil importers step up dollar purchases later in the day, traders said.
One-month offshore non-deliverable forward contracts were quoted at 53.34, indicating more short-term weakness in the onshore spot rate.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were around 52.89 on total volume at $230 million.
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