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The Indian rupee is likely to inch up on Tuesday, helped by a pullback in the dollar index and a lower-than-expected trade deficit.

Non-deliverable forwards indicate rupee will open at around 82.25 to the U.S. dollar compared with 82.2950 in the previous session.

With the move higher on the dollar "taking a pause", the rupee should see "a better session or at least not fall more", a spot trader said. For USD/INR, 82.40 looks like the next level to monitor on the upside, he said.

The dollar index was down near 102.40, having reached an over one-month high of 102.75 on Monday. The standoff between Democrats and Republicans over raising the debt ceiling alongside weak U.S. data dulled demand for the dollar.

While U.S. President Joe Biden expressed confidence a deal could be done in time, Republican House of Representatives Speaker Kevin McCarthy said the two sides were still far apart. U.S. Treasury Secretary on Monday reiterated that the U.S. could breach the debt ceiling by June 1.

Talks on agreeing on an increase in the U.S. debt ceiling are intensifying with the date where the U.S. will be unable to meet all its spending obligations if an agreement is not reached rapidly approaching, ANZ said in a note.

A local U.S. survey showed a slump in manufacturing activity. The Empire State manufacturing index plunged 42.6 points to -31.8 in May. A reading below zero indicates a monthly contraction.

Meanwhile, India's merchandise trade deficit in April dropped to $15.2 billion from $19.7 billion in the previous month. Economists polled by Reuters had expected a $19.5 billion print.

The merchandise and services deficit fell to $1.38 billion, a 21-month low.

The data "basically" reaffirms that India's external position is "very manageable", the spot trader said.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.36; onshore one-month forward premium at 11 paisa ** USD/INR NSE May futures settled on Monday at 82.3150

** USD/INR May forward premium at 4.5 paisa ** Dollar index down at 102.40 ** Brent crude futures up 0.6% at $75.7 per barrel ** Ten-year U.S. note yield at 3.49% ** SGX Nifty nearest-month futures up 0.3% at 18,458 ** As per NSDL data, foreign investors bought a net $193.2 mln worth of Indian shares on May 14

** NSDL data shows foreign investors sold a net $140.2mln worth of Indian bonds on May 14