The rupee inched up to 81.5225 to the dollar from 811.59 in the previous session. For the week, the local currency was down 0.5%.
The currency came under pressure after it managed to climb above the 81 level on Monday thanks to dollar purchases from public sector banks, likely on the directions of the Reserve Bank of India.
The RBI's suspected intervention prompted short speculative dollar positions to exit and importers to step up hedges for near maturities, a trader at a private sector bank said.
The RBI's dollar purchases "were not a big surprise" and were consistent with what the central bank has been doing over the last several weeks, the trader added.
For the dollar, it was a relatively quiet week against its major peers. The dollar index was only marginally lower week-on-week, with the U.S. Federal Reserve policy review lined up for next week.
The Fed is widely expected to opt for a 25-basis-point rate hike on Feb 1. The key will be what Fed officials say on the future path, especially with investors pricing in rate cuts for later this year.
On the same day, India will present its federal budget.
"Markets are possibly a little cautious ahead of the budget on the lack of (dollar) inflows and (India's) high current account deficit is an ongoing concern," said Jayaram Krishnamurthy, head of research and advisory at Almus Risk Consulting.
Meanwhile, the impact of the decline in Indian equities due to the Adani Group-led selloff was fairly limited. Indian equities have dropped 2.7% in the last two days. [.BO]
(Reporting by Nimesh Vora; Editing by Savio D'Souza)
By Nimesh Vora
