By Anushka Trivedi
MUMBAI (Reuters) - The Indian rupee strengthened against the U.S. currency on Wednesday, as the dollar remained muted and Treasury yields declined.
The rupee was trading at 81.5350 per dollar by 10:13 a.m. IST, compared with its previous close of 81.72.
The currency weakened around 0.7% in the first two days of the week. Traders pointed to the Reserve Bank of India likely buying dollars on Monday when the rupee scaled a high of 80.88.
"A tussle between buyers and sellers is likely to continue" as inflows into the market could keep the rupee strong, but RBI's intervention on the other side could limit gains, said Amit Pabari, managing director at CR Forex.
"The currency's broad range would remain between 80.80 to 82.10."
India's first-ever green bond will be open for auction later in the day while bidding for Adani Enterprises' 200 billion rupees ($2.45 billion) follow-on public offering begins on Friday.
Asian currencies were a mixed bunch as some countries resumed trading after two days of holidays for the Chinese New Year. The offshore yuan climbed 0.1%, while the Indonesian rupiah slipped.
Wall Street indexes closed mixed overnight, though their Asian counterparts gained.
The dollar index searched for direction around the 101.90 levels, lately pressured by a surging euro and weak domestic economic data.
U.S. business activity contracted for the seventh straight month in January, adding to a slew of data that showed the Federal Reserve's monetary tightening was inducing an economic slowdown.
Treasury yields continued to fall. The 2-year yield, which tracks short-term interest-rate expectations, was down another 5 basis points (bps) to 4.16% and has overall declined over 20 bps this month.
At the Fed's interest rate decision on Feb. 1, markets largely expect a smaller 25 bps hike.
($1 = 81.5470 Indian rupees)
(Reporting by Anushka Trivedi; Editing by Dhanya Ann Thoppil)