The rupee is trading firm at 53.74/75 versus its previous close of 54.80/81 on the back of the cut in withholding tax on foreign investments in local debt announced on Tuesday.
Traders say gains in domestic shares also hurting the pair, but failing to have a large impact as most people are already short on USD/INR.
Sentiment cautious ahead of the Reserve Bank of India's annual monetary policy review on Friday when it is widely expected to lower rates by 25 basis points.
Traders say good dollar demand seen from state-run banks limiting a further downside to the pair. It is expected to hold in a range of 53.60 to 53.90 during the session.