The rupee pulled back sharply from near its all-time lows of close to 80 per dollar early on Monday, tracking a broader run-up in risk assets, a fall in crude oil prices to below $100 a barrel and as the greenback lurked below multi-year highs.
Bloomberg quoted the rupee at 79.7663 against the dollar after opening at 79.7713. PTI reported that the rupee gained 6 paise to 79.76 against the US dollar in early trade.
That was because the dollar began the week nudging down from multi-year highs, although fears about Europe's gas supply put a cap on greenback selling.
Reuters reported that traders were holding their breath ahead of Thursday, when gas is supposed to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance.
"If that doesn't happen, that would be a very bad thing for a lot of currencies," Joseph Capurso, head of international economics at Commonwealth Bank of Australia, with the euro likely to be the biggest loser and the dollar a beneficiary, told Reuters.
Asian stocks, including domestic benchmark indices, rallied as a fall in crude prices suggested somewhat subdued inflation expectations and, in turn, rate hikes.
Oil markets have been in a see-saw mode and on Monday crude prices fell below $100 per barrel, bringing relief to consumers and policymakers worldwide.
Crude prices fell $1 in early trading in Asia to below $100 a barrel, cutting into gains from Friday, as attention turned back to rising COVID-19 cases in China and the prospect of lockdowns again reducing fuel demand in the world's top oil importing nation.
But analysts warned that the dollar's reign is here to stay.
"There has been a fixation with how the dollar is poised to weaken," analysts at HSBC said in an outlook report which instead raised the bank's dollar forecasts broadly.
"There has been too much attention paid to the dollar's frailties but not enough to the increasing ones elsewhere, which are causing the dollar to be overvalued. Global growth is slowing and the downside risks are intensifying, which is USD positive...this dollar bull run is not over yet," added HSBC's analysts.