At 10:55 a.m. (0525 GMT), the partially convertible rupee was at 44.77/7750 per dollar, a tad weaker than Monday's close of 44.7550/7650, after weakening to 44.8250.

"The Asian markets were negative, that is why the rupee had opened weaker. Now, the euro is becoming stronger, which is supporting the rupee," a trader at a state-run bank said.

Traders forecast a 44.70-44.90 range for the day.

The euro edged up early in Asia, steadying from a slide in a relatively subdued session overnight after the Eurogroup chairman said the common currency was over valued.

The euro was trading at $1.4609, after touching a low of $1.4564. It was at $1.4607 when the domestic market closed on Monday.

The index of the dollar against six major currencies was down 0.11 percent at 73.869 points.

"Basically the rupee will be euro/dollar driven till any major flow comes into the market," a dealer with a private bank said.

Oil payments will continue to weigh on the market, traders said.

India imports more than three-quarters of the oil it consumes and refiners are the biggest buyers of dollars in the domestic foreign exchange market.

Brent crude fell below $114 a barrel on Tuesday on expectations OPEC may raise its production target this week and lingering concerns that a weak economic outlook will dent demand.

There was little direction from the stock market, with the 30-share BSE index down 0.09 percent.

The one-month onshore forward premium was up 2 basis points at 26 points. The three-month was at 76 points against 75.25 at previous close and the one-year was at 279.25 points versus 276.25.

The one-month offshore non-deliverable forward contracts were quoted at 44.97, weaker than 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 all at 44.9325, with total volume at $1.6 billion.

Copyright Reuters, 2011