The Indian rupee is trading at 61.53/54 versus its previous close of 61.46/47 and is off the session high of 61.35, hurt by a retreat in domestic shares with sentiment remaining cautious ahead of the Reserve Bank of India's monetary policy review on Tuesday.
The RBI will likely raise its lending rate further on Tuesday, cementing its inflation-fighting credentials despite the country's sputtering economic growth, a Reuters poll showed.
The BSE Sensex is trading largely flat after rising as much as 0.4 per cent.
Gains in other Asian currencies are, however, expected to limit a very sharp rise in the pair.
The macro economic report to be published at 5 pm will be critical in offering some clues about Tuesday's policy review.
Earlier, the Indian rupee trimmed its initial gains against the American currency but was quoted still higher by two paise to 61.44 per dollar on mild selling of dollars by banks and exporters on the back of weakness of dollar overseas.
The rupee resumed higher at 61.35 per dollar as against the last weekend's level of 61.46 per dollar at the Interbank Foreign Exchange (Forex) Market and hovered in a range of 61.39 per dollar and 61.50 per dollar before quoting at 61.44 per dollar at 1045hrs.
In New York, the US dollar struggled for direction last Friday, attempting to rebound from a nearly two-year low versus the euro, as end-of-week position-squaring competed with lacklustre economic data, including a steeper-than-expected fall in consumer sentiment.
Meanwhile, the Indian benchmark Sensex rose by 41.18 pts or 0.20 per cent to 20,724.70 at 1050 hrs.