The outlook, however, remains hazy for the rupee that has been under pressure due to slowing exports and a widening trade deficit.
"Though there is some improvement in the mood globally due to the developments in Europe, nobody is sure whether the worst is over. So volatility will continue to be seen in the foreign exchange markets," said a dealer with a private sector-bank.
Partially convertible rupee was at 50.00/50.01 per dollar, 0.2 percent stronger than 50.1150/1250 at close on Friday when it had touched a two-and-half year low of 50.4200 during trade.
Traders forecast a range of 49.90 to 50.20 for the day, with the monthly inflation due around noon (0630 GMT) awaited for direction.
The wholesale price inflation probably slowed only a tad to 9.61 percent in October from 9.72 percent the month before, as tighter monetary policy had little effect on high food and energy prices, the median forecast in a Reuters poll showed.
Asian stocks and the euro rose on Monday on hopes that new technocratic leaders in Italy and Greece will take decisive action to save their indebted nations from bankruptcy and fend off a wider financial meltdown in the euro zone.
India's main share index was up more than 0.8 percent with banks leading the gains.
Traders said there was scattered demand for dollars from oil refiners, the biggest buyers of greenback in the local forex market, and for defence-related payments.
The euro was at $1.3762 after moving in a band of $1.3756 to $1.3811, while the index of the dollar against six major currencies was down 0.09 percent at 76.878 points.
The one-month onshore forward premium was steady at 27 points from Friday, the three-month was at 68 points from 66.50 and the one-year was at 173.25 points from 163.50.
One-month offshore non-deliverable forward contracts were quoted at 50.35, 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 United Stock Exchange and the MCX-SX were all at 50.17. The total volume was at $960 million.
Copyright Reuters, 2011