MUMBAI, Jan 9 (Reuters) - The Indian rupee was higher on Tuesday, aided by an uptick in its Asian peers and positive sentiment in light of a proposal to include eligible Indian bonds in the Bloomberg Emerging Market Local Currency Index.
The rupee was at 83.0950 against the U.S. dollar as of 10:10 a.m. IST, higher by 0.05% compared with its close at 83.1375 in the previous session.
The dollar index was slightly weaker at 102.15, while most Asian currencies ticked up, with the Thai baht leading gains up by 0.4%.
The rupee was also aided after Bloomberg Index Services on Monday proposed the inclusion of eligible Indian bonds in its EM market local currency index from September.
The dollar-rupee pair was "well-offered" on Tuesday but it will be key to watch if it falls below the 83 handle, a foreign exchange trader at a private bank said.
"A fall below 83 could create room for a slide towards 82.90," the trader added.
The dollar slipped on Monday after the Federal Reserve Bank of New York's latest survey of consumer expectations showed that projection of inflation over the short run fell to the lowest in nearly three years.
"Despite the encouraging fundamentals... the ongoing tug-of-war between the intrinsic strength of the rupee and the RBI's (Reserve Bank of India) interventions have capped the rupee from appreciating," Amit Pabari, managing director at FX advisory firm CR Forex, said.
Meanwhile, rupee forward premiums ticked up on Tuesday with the 1-year implied yield rising 3 basis points to 1.83%, the highest in three months.
Investors now await key U.S. consumer inflation data due on Thursday which is likely to shape expectations on potential easing of policy rates in the world's largest economy.
Investors are currently pricing in a nearly 63% chance that the Federal Reserve will cut policy rates in March, according to CME Group's FedWatch tool.
Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala
