"The year was marked by the outbreak of Covid-19 leading to a sell-off in the financial markets and the dramatic contraction in economic growth around the globe," EMTA said in a statement.
"The adoption of expansive monetary policies and historically low US Treasury yields later encouraged capital flows into higher-yielding asset classes including EM."
"Gold has support nearby at $1,720, and if the US dollar strengthens in Asia and Europe, it could test that level, prompting some stop-loss selling," said OANDA senior market analyst Jeffrey Halley.
Turkey's shock weekend decision to replace its hawkish central bank governor also supported the dollar's safe-haven appeal.
Markets have been slow to catch on to the rising dollar theme in recent weeks as investors had bet that a global economic recovery would prompt buying of riskier currencies.
The 30-year bond yield also eased after reaching 2.518% on Thursday, its highest since August 2019. It was last less than a basis point lower at 2.4685%.
"Ultimately, what we're seeing now is a great deal of tension between market prices that embed several rate hikes before the end of 2023 and the Fed's forecast that doesn't expect liftoff until 2024," he said.
The blue-chip NSE Nifty 50 index ended up 1.28% at 14,744 and the benchmark S&P BSE Sensex rose 1.3% to 49,858.24. Earlier in the session, the Sensex and Nifty shed up to 1.43% and 1.28%, respectively.
Sentiments in the short-term, however, are weak due to a rise in COVID-19 cases and volatility in bond yields, Sharma said.
The euro weakened 0.2% to $1.1926 after rising last week for the first time in three weeks as latest data showed hedge funds slashed their net euro positions.
The rand had earlier in the session struggled to make meaningful gains as scheduled power outages by state utility Eskom dragged into their sixth day and weighed on sentiment.
Eskom said on Monday that it aimed to get its power plant performance to "acceptable levels" by late 2021.
The benchmark 10-year yield, which reached 1.642% on Friday, its highest level since February 2020, was last down 3 basis points at 1.6055%.
"What we expect is that there is not going to be any change at this point," said Kelly Ye, director of research at IndexIQ, a unit of New York Life Investment Management Holdings.