MUMBAI | Tue Sep 14 - India's gold futures traded firm on Tuesday as the U.S dollar slipped against other currencies, denting demand from physical buyers.

"Demand is slightly on the lower side because although the dollar-rupee is favourable rate for gold buyers, the gold-dollar rate has moved up to $1,255," said a dealer with a foreign bank.

"At these levels the kind of demand we have seen for the past 5-7 days is difficult to come by," he added.

Gold and dollar move in opposite directions as a weak dollar enhances the yellow metal's appeal as an alternative investment.

Gold on Multi Commodity Exchange of India (MCX) was trading at 18,966 rupees, up 0.57 percent.

"We have done deals of around 100 kgs, but in this sort of a market where demand started coming up, these deals are not much," said another bank dealer.

Traditionally, demand for gold in India, the world's largest consumer of bullion, is high during the Sept-November festival season. Dhanteras, considered auspicious day for buying gold, is in November.

The rupee strengthened on Tuesday as shares rallied more than 1 percent, boosting hopes for more portfolio inflows.

A strong rupee makes the dollar-denominated commodity cheaper as it plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

A Reuters poll has estimated India's gold imports in 2010 at 504.5 tonnes, up by 24.5 tonnes from last year.