The rupee edged higher on the back of dollar sales by custodian banks acting on behalf of foreign funds, but broader gains were capped by greenback demand from importers.
With few domestic factors at play, the rupee remains stuck in a broad range, with support from overseas investors who were net buyers of Indian shares worth $40.62 million on Monday, marking their fourth consecutive session of inflows.
Appetite for debt also remains robust, with foreign investors buying $132.01 million worth on Monday, taking total inflows so far this year to $12.59 billion. The sale of the foreign investor limits on Monday also saw strong demand.
But traders also say oil-related dollar demand is capping broader gains in the rupee, while a stand-off between Russia and the West also continues to spark uncertainty in global markets.
"Foreign exchange market continues to remain in a range. Some participants believe geo-political tensions can change the trend, but I don't see much of a change in the domestic market situation in the near-term," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
"I expect the rupee to remain in a 59.80 to 60.80 range over the next month," he added.
The partially convertible rupee closed at 60.24/25 per dollar compared with 60.30/31 on Monday. The unit moved in a tight range of 60.18 to 60.2850 during the session.
Traders will continue to monitor moves in other Asian currencies for clues in the near-term. Most Asian currencies pushed higher on Tuesday.
Asian stocks touched a three-year peak on Tuesday, despite lingering concerns about crises in Ukraine and Gaza, while the yen eased against the dollar and the euro.
In the offshore non-deliverable forwards, the one-month contract was at 60.50 while the three-month was at 61.01.