The rupee fell slightly on Wednesday as caution prevailed ahead of the U.S. Federal Reserve's decision on whether to expand monetary stimulus, but a robust growth in factory output and inflows related to share sales supported the local currency.
The Federal Reserve is expected to announce a new round of bond purchases after its meeting later in the day, setting up the prospect of a round of dollar weakness that could propel emerging market currencies.
Investors are also looking ahead at November inflation date due on Friday, which will be the key ahead of a Reserve Bank of India's policy review on December 18.
"We are likely to see some more government stake sales and M&A deals, which will support the rupee," said Satyajit Kanjilal, chief executive at Forexserve, an advisory firm for corporates.
"I expect the rupee to gain towards 53.50-53.60 levels towards the last week of December."
The partially convertible rupee closed at 54.32/33 per dollar, weaker than its close of 54.26/27 on Tuesday.