The Indian rupee firmed on Friday, as most Asian currencies gained against a weaker dollar, but the local currency stopped short of breaching a key resistance level.
The rupee was at 81.52 per dollar by 0455 GMT, having risen to 81.49 momentarily. It closed at 81.63 in the previous session.
The sentiment is fairly risk-positive, but there will be a lot of dollar-buying orders near 81.50-levels, with importers trying to hedge, said a trader at a private bank.
The rupee's trend is of a rangebound movement, and it is unlikely to appreciate further sharply, the trader added, saying that the 81.40-81.45 zone may hold in the near term.
The currency has moved in an extremely narrow 81.50-81.90 per dollar range this week, despite the greenback's tumble, to underperform its Asian peers.
If it holds the day's gains, the rupee will be on track to appreciate 0.2% this week. In contrast, the Malaysian ringgit , the South Korean won, and the Thai baht are eyeing a rise of about 2.2%, 1%, and 0.4% for the week, respectively.
The dollar index extended losses to fall near a three-month low of 105.750 on the prospect of the Federal Reserve slowing monetary policy tightening from as soon as December.
The index is down 5.5% this month alone.
Futures currently show an 80% probability that the Fed will now switch to a 50-basis-point (bps) hike in December.
Meanwhile, foreign investors have pumped more than $3 billion into Indian equities so far this month, supporting the rupee. India's BSE Sensex stock index touched a record high on Thursday. (Reporting by Anushka Trivedi in Mumbai; Editing by Janane Venkatraman)