The rupee rose slightly on Wednesday, as traders watched for further signs of recovery in the euro, but choppy domestic stock markets limited the gains.
The partially convertible rupee ended at 46.17/18 per dollar, slightly stronger than its Tuesday close of 46.2350/2450. It traded in a band of 46.14 to 46.35 during the day.
"The rupee drew its strength from the euro's rally in late New York trade on Tuesday. But choppy stocks made it tough for the rupee to climb," said a senior dealer with a foreign bank.
"I see the rupee in the 46.15 to 46.35-a-dollar range tomorrow," he said.
The euro held steady on Wednesday after rising 0.1 percent in late U.S. trade on Tuesday. A sharp fall in U.S. stocks the previous day and a subsequent drop in the Nikkei helped support the dollar and the yen. The dollar index against six other major currencies fell 0.2 percent at the time of close of local trading.
Other Asian currencies were pressured as expectations of a strong impact from China's yuan policy receded and weak U.S. home data renewed worries about the global recovery. The benchmark BSE share index erased early losses to close almost flat.
Foreign funds have bought a net $1.4 billion worth of shares in June after dumping around $2 billion in May. The flows have a large impact on the rupee's fortunes and are watched by investors. Foreigners are net buyers of $6 billion in 2010.
Traders also awaited the U.S. Federal Reserve's rate decision later on Wednesday. The Fed is expected to keep rates on hold and restate its intention to keep rates near zero for an extended period.
One-month offshore non-deliverable forward contracts were quoted at 46.29, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX ended at 46.2050 and 46.2075, respectively, with the total traded volume on the two exchanges at about $7.1 billion.