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 The Indian rupee is likely to decline slightly on Tuesday after U.S. Treasury yields recovered from their lowest level in 3 months and the dollar index ticked higher.

Non-deliverable forwards indicate the rupee will open at around 83.39-83.40 to the U.S. dollar compared with 83.3650 in the previous session.

The rupee had fallen to its lifetime low of 83.42 on Nov. 10.

The 10-year U.S. Treasury yield rose 6 basis points in New York to 4.28% and last quoted slightly lower in Asia. The dollar index was steady at 103.6 after having risen to its highest level in a week overnight.

While there were no clear triggers for the move higher, analysts reckon that it was a partial reversal of sharp drops seen over the last 3 weeks as investors wagered on the U.S. Federal Reserve cutting interest rates in 2024.

Fed futures are now pricing in slightly over 100 basis points of rate cuts in 2024, beginning most likely from March or May.

The rupee may see "another session with a narrow range," as traders remain shy of pushing the currency lower due to expectations that the Reserve Bank of India (RBI) will likely intervene to defend the rupee.

Asian currencies were mostly lower with the Korean won, down 0.5%, leading losses.

The rupee is expected see some volatility this week due to a series of U.S. economic data and RBI's monetary policy decision, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.

Investors will keep a keen eye on a crucial U.S. labour market report on Friday, which could offer cues on how well placed the market's expectations on the Fed's policy rate trajectory are.

The RBI will deliver its monetary policy decision on Friday and is widely expected to hold rates steady.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.45; onshore one-month forward premium at 6.5 paisa

** Dollar index up at 103.64

** Brent crude futures up 0.1% at $78.1 per barrel

** Ten-year U.S. note yield at 4.26%

** As per NSDL data, foreign investors bought a net $685.9 mln worth of Indian shares on Dec. 1

** NSDL data shows foreign investors bought a net $131 mln worth of Indian bonds on Dec. 1