The Indian rupee rose on Tuesday, set for its first gain in four sessions, helped by a slightly soft dollar and data that reinforced the South Asian country's improving external position.
The rupee was quoted at 82.19 against the U.S. dollar as of 10:56 a.m. IST, up from 82.2950 in the previous session. The rupee had dropped to a low of 82.3725 on Monday.
The pull back of USD/INR from above 82.35 hinted at "hesitation" from traders, said Anand James, chief market strategist at Geojit Financial Services.
The dollar index dropped overnight, taking a breather following its recent rally. Analysts cited weak U.S. economic data and worries over the country's debt ceiling for the pullback in the dollar.
Meanwhile, India's merchandise trade deficit in April dropped to $15.2 billion from $19.7 billion in the previous month. Economists polled by Reuters had expected a $19.5 billion print.
India's April services surplus was at $13.9 billion, with exports at $30.36 billion and imports at $16.50 billion.
"The strength of services exports has provided an important prop to the external position," Capital Economics said in a note.
Combined with lower import values on the back of softer domestic demand and relatively low commodity prices, the strength of services exports will mean the current account deficit will narrow a touch this year, it said.
"This reinforces our view that the depreciation of the rupee will be limited even amid a backdrop of a stronger U.S. dollar."