The Indian rupee rose marginally in early trading on Thursday, aided by gains in most Asian currencies, with dollar-rupee forward premiums also ticking up ahead of the Reserve Bank of India's (RBI) monetary policy decision.
The rupee was at 83.93 against the US dollar as of 09:30 a.m. IST, compared with its previous close at 83.9550.
The currency had fallen to an all-time low of 83.9725 on Wednesday amid lingering pressure due to the unwinding of carry trades funded using the Chinese yuan and the Japanese yen.
The dollar index was marginally lower at 103 after rising 0.2 per cent on Wednesday and most Asian currencies were up between 0.1 per cent to 0.7 per cent.
While traders expect the rupee to weaken below 84, interventions from the RBI have kept the currency well-supported above the psychologically important level.
"The rupee is projected to oscillate within a narrow band of 83.80 to 84.05, with a slightly broader range of 83.90 to 84.20 expected in the medium term," said Amit Pabari, managing director at FX advisory firm CR Forex.
Dollar-rupee forward premiums nudged higher, with the 1-year implied yield up 3 basis points to 2.04 per cent.
While the RBI is widely expected to keep rates unchanged in its policy decision due at 10:00 a.m. IST, traders will attention to commentary from policymakers for cues on the future path of interest rates.
"There is a probability of dovish remarks or change in stance, which could pull down forward premiums," a trader at a large private bank said.
The trader expects the 1-year implied yield to be supported at 1.95 per cent, considering expectations of the US Federal Reserve starting rate cuts in September.