The rupee may rise on Wednesday as firm Asian stocks raise expectations for foreign fund flows into local stocks, but gains will be muted with oil at near record highs.
The partially convertible rupee ended at 42.885/895 per dollar on Tuesday, 0.13 percent stronger than its close of 42.945/955 on Monday. It hit a 13-month low of 43.21 last month.
Indian shares rose nearly 2 percent on Tuesday, led by gains in banking and financial stocks, taking their rise this week to 3.3 percent.
Foreign fund outflows in recent months have been weakening the rupee. Foreigners have sold a net $5.7 billion worth of Indian stocks so far in 2008, helping push the rupee down more than 8 percent.
They had bought a record net $17.4 billion of stocks last year, when the rupee rose more than 12 percent.