The rupee closed at 83.5175, after ending at 83.5075 in the previous session. The currency hovered in a narrow band between 83.4950 and 83.5175 in Wednesday's session.
Dollar demand from local corporates and oil companies and have maintained pressure on the rupee over the last few sessions, traders said.
While offers to sell dollars from state-run banks often prompt speculation of an RBI intervention, some traders stated that the rupee has also been hemmed in by the expectation that the central bank will sell dollars to prevent weakness in the rupee.
That has dulled speculative appetite to push the rupee lower, keeping the currency in a tight band despite strong local dollar demand, a foreign exchange trader at a foreign bank said.
Meanwhile, dollar-rupee forward premiums inched up on Wednesday with the 1-year implied yield up 2 basis points at 1.70%, its highest level in nearly two weeks.
While the rupee has been hovering close to its record low levels, volatility has been largely muted, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said. The rupee had declined to its all-time low of 83.5750 on April 19.
The dollar index was up 0.1% at 105.5 while Asian currencies declined between 0.1% to 0.4%.
With the week relatively light on U.S. economic data releases, investors will pay close attention to remarks from Fed officials for further cues on when the central bank may begin to ease policy rates.
Investors are currently pricing in about two rate cuts in 2024.
