The rupee rebounded on Monday on foreign fund investments after the currency initially fell on import payments for oil, and traders said they were watching Greece for direction on fund flows.
At 10.42am (0512 GMT), the rupee was at 49.29/30 to the dollar, stronger than Friday's close of 49.40/41 and off 49.54 struck in early trade.
Vikas Babu, a foreign exchange trader at state-run Andhra Bank, said some banks sold dollars on behalf of foreign portfolio investors, helping the rupee rise after opening lower.
Foreign funds have moved around $7 billion into domestic debt and equity in 2012 as of February 10, data from the Securities Exchange Board of India showed.
The rupee is likely to move in a 49.30 to 49.80 range, said Subramaniam Sharma, director of brokerage Greenback Forex, adding the market was keeping a close eye on a likely Greek deal to avoid default. A deal could boost risk sentiment and capital flows into emerging economies like India,
Greece's parliament approved a deeply unpopular austerity bill to secure a second EU/IMF bailout and avoid national bankruptcy, as buildings burned across central Athens and violence spread around the country.
The market is also awaiting inflation data due on Tuesday for clues on the Reserve Bank of India's rate action.
Headline inflation rate is expected to have cooled to 6.60% year-on-year in January from 7.47 percent in December, helped by easing food prices, a Reuters poll showed.
One-month offshore non-deliverable forward contracts were at 49.63.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all around 49.45, on total volume of $1.2 billion.
Oil refiners, the largest buyers of dollars in the local market, were active in the morning as Brent crude rose above $118 a barrel, traders said.