The rupee is expected to open at around 81.25 per dollar, compared with 81.3175 in the previous session.

The onshore yuan jumped about 1% against the dollar to 6.9792, breaching the 7-level to hit its highest in two-and-a-half months and adding to last week's 1.5% advance. More Chinese cities in the far west announced an easing of coronavirus curbs on Sunday.

Other Asian currencies followed the yuan higher. The Korean won and the Malaysian ringgit were both up 0.5%.

After the likely opening uptick based on Asian cues, "the balance of probability" is that the rupee "will not do much", a trader at a Mumbai-based bank said.

If the rupee struggled to move above 81 last week, despite the host of positive cues, there is little reason to think it will be different today, the trader added.

Last week, the rupee was unable to climb above 81 due to decent demand for forward dollars from importers, according to market participants.

The dollar index declined, adding to Friday's drop. The greenback managed to rally initially, on Friday, after an upbeat U.S. jobs report but was unable to sustain the move.

U.S. non-farm payrolls increased by 263,000 jobs last month, more than what economists had expected, and data for the prior month was revised higher, the Labor Department said.

Meanwhile, the Reserve Bank of India begins its three-day policy meeting, with the decision due on Wednesday.

The central bank will likely raise interest rates by a smaller 35 basis points, to 6.25%, according to economists polled by Reuters, as inflation still remains a concern. The last three times the RBI has raised rates by 50 bps.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 81.36; onshore one-month forward premium at 12 paise

** USD/INR NSE Dec futures settled on Friday at 81.43

** USD/INR Dec forward premium at 8.5 paise

** Dollar index at 104.32

** Brent crude futures up 1.7% at $87 per barrel

** Ten-year U.S. note yield at 3.53%

** SGX Nifty nearest-month futures up 0.2% at 18,870

** As per NSDL data, foreign investors sold a net $181.8 million worth of Indian shares on Dec. 1

** NSDL data shows foreign investors bought a net $8.2 million worth of Indian bonds on Dec. 1

(Reporting by Nimesh Vora; Editing by Savio D'Souza)

By Anushka Trivedi and Nimesh Vora