The rupee closed at 82.7250 per U.S. dollar compared with 82.6750 in the previous session, while daily volume was lower than on most days, according to traders.
A trader at a private sector bank said it was a “dull” session, marked by some dollar demand from importers, while speculators were “mostly” on the dollar offer side.
The local unit moved in about 16 paisa trading range on Tuesday after last week’s volatility.
The rupee had hit a record low of 83.29 to the dollar last week, before intervention by the Reserve Bank of India helped it recover.
A few analysts now believe the rupee is unlikely to fall significantly below its record low, at least for the rest of 2022.
The rupee is likely to “find its ground” between 83 and 83.50 to the dollar, Arnob Biswas, head FX research at SMC Global Securities, said.
Elaborating on the assessment about rupee having seen its worst for the year, Biswas said there is a “sense that (U.S.) Fed may slow down the (rate) hike cycle” and that the dollar index is likely to be weaker over the next two months, possibly falling to below 109.
The U.S. dollar index was little changed at around 112, having come under pressure amid bets that Fed officials may slow down the pace of rate increases soon.
Meanwhile, the focus in the Asian currency space was firmly on the Chinese yuan.
The yuan traded outside of China dropped to a record low of 7.3650 per dollar following a weaker-than-expected daily fix from the country’s central bank. Other Asian currencies followed the yuan lower.
Indian financial markets will be closed on Wednesday for a local holiday.