The rupee was trading marginally higher against the dollar on Wednesday tracking an overnight slide in oil prices.
The rupee was quoting at 82.8375 to the dollar by 10:36 a.m. IST, up from 82.88 in the previous session.
The fall in oil prices probably just delays what we think is inevitable based on the recent price action, a trader at a private bank said.
Brent crude futures were little changed in Asia trading after falling by 4.4% in the previous session, the largest drawdown in over three months.
USD/INR looks poised for a move above 83 and we reckon it will happen sooner rather than later, the trader added.
The rupee on Tuesday almost fell below the 83-level. The suspected dollar sales by the Reserve Bank of India (RBI) via public sector banks once again helped the local currency from slipping below what is now considered a major psychological level.
All eyes will be on the minutes of the US Federal Reserve's December meeting, said Kunal Sodhani, vice president at Shinhan Bank. He pegged support for USD/INR at 82.65 and resistance at 83.10.
Asian shares and currencies were mixed on the day while the dollar index surrendered a part of Tuesday's rally. Due during U.S. trading hours, the minutes will provide investors with cues on how much further rates are likely to rise.
For early 2023, futures are pricing in market expectations of the Fed raising rates by another 50 to 75 basis points (bps) and following that up with shallow cuts later in the year. This is in contrast to indications by Fed officials that there will be no rate cuts in 2023.
Rupee forward premiums inched lower with the 1-year implied yield hovering just shy of 2%. Premiums are currently caught between the RBI sell/buy swaps on one side and the interbank more inclined to take positions on the other side, according to traders.