The partially convertible rupee was at 45.2200/2275 per dollar, 0.3 percent stronger than Friday's close of 45.35/36. It touched 45.1700 earlier.

Traders expect the rupee to trade in a 45.13-45.33 band.

"It is unlikely to strengthen beyond 45.13. There is a lot of oil demand today, which is preventing a sharper rise," a trader with a state-run bank said.

Oil is India's biggest import item and oil refiners are the largest buyers of dollars in the local market.

India is estimated to owe around $4 billion to Iran for its oil imports and domestic oil firms have been aggressively buying dollars to make these payments.

Brent crude futures edged down on Tuesday, after rising nearly $2 a day earlier, as soft US economic data renewed fears of weaker oil demand from the world's top oil consumer and a rebound in the dollar spurred selling.

The euro was largely steady against the dollar on Tuesday, just below a three-week high, with focus on whether a Franco-German summit will come up with further measures to help quell the euro zone's sovereign debt crisis.

A focal point of the meeting is whether there will be any signs of progress towards the issuance of joint eurobonds.

"The risk aversion has eased, but the market is awaiting the outcome of the meeting," a trader with another state-run bank said.

The euro was at $1.4416. It was at $1.4268 at end of local forex trade on Friday, while the index of the dollar against six major currencies was at 73.953 points, compared with 74.449 points previously.

Indian shares rose 0.77 percent on Tuesday, in line with global markets.

The one-month onshore forward premium was at 9.75 points from 7 points on Friday.

The three-month was at 37.50 points from 31.25 points and the one-year onshore forward premium was at 151.75 points from 137.75.

One-month offshore non-deliverable forward contracts were quoted at 45.33, 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 45.2550. The total volume was at $1.98 billion.