The rupee eased on Monday as oil import payments picked up and uncertainty about a deal to help debt-ridden Greece drove most Asian equity markets down.
Global risk appetite is a key driver for the rupee, which has strengthened 7.3% this month on a sharp rise in foreign fund investment after falling 16% in 2011.
"Caution over Greece debt deal is hurting the rupee a bit alongside month-end dollar purchases by oil companies," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
At 10:37 am, the rupee was at 49.47/48 to the dollar, 0.3% weaker than 49.3050/3150 at close on Friday when it rallied during trade to 49.2975, a level last seen on November 8.
However, the outlook for the rupee is bullish, Raina said, adding he expects the currency to strengthen past 49 in the coming sessions.
Foreign funds have bought Indian shares worth $1.8 billion so far in January, and invested $3.4 billion in debt, according to Securities and Exchange Board of India.
In a report on Sunday, professional services firm Ernst & Young said foreign direct investment in India is set to swell in coming years as investors search for growth.
Asian shares inched down and the euro fell from its highest in more than six weeks on Monday, as markets cautiously tuned in to a likely debt swap deal for Greece that is crucial to avoiding a messy default and eyed yet another European summit meeting.
The 30-share BSE index was down 0.9% as profit-taking emerged after an 11.5% rally this month.
One-month offshore non-deliverable forward contracts were at 49.84.
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 all were around 49.82 on total volume of $765 million.