MUMBAI, Feb 12 (Reuters) - The Indian rupee ended little changed on Monday as an uptick in the dollar index eroded the local currency's early gains which were aided by mild dollar sales from foreign and local private banks, traders said.
The rupee ended at 83.0025 against the U.S. dollar, barely changed from 83.0350 in the previous session. The currency hovered in a tight range between 82.9825 and 83.0250 during the day.
The dollar index ticked higher to 104.18, while the offshore Chinese yuan strengthened slightly. Most Asian markets, including Japan and China, were shut on Monday on account of local holidays.
While the dollar-rupee pair dipped slightly towards the start of the session, its inability to hold below 83 could signal that the "sell on upticks" bias may have diminished, a foreign exchange trader at a state-run bank said.
Inflation data due both in India and the United States is likely to be a key driver for markets in the near term with the latter seen as the more significant cue for the rupee.
India's retail inflation is expected to have dropped to a three-month low of 5.09% in January, according to economists polled by Reuters.
Meanwhile, month-on-month core consumer price inflation in the U.S. is expected to have remained steady at 0.3% in January.
The rupee is likely to weaken slightly heading into the release of U.S. inflation data and could see some consolidation around 83.20 thereafter, Gaurang Somaiya, a foreign exchange research analyst at Motilal Oswal Financial Services, said.
The inflation data will impact market expectations of when the Federal Reserve may begin to ease policy rates.
Investors are currently pricing in a 17.5% chance of a rate cut in March and about 63% in May, according to CME's FedWatch tool. (Reporting by Jaspreet Kalra; Editing by Sohini Goswami)
