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The Indian rupee closed stronger on Thursday but lagged behind its Asian peers that sharply rallied after the US Federal Reserve delivered a dovish hold on policy rates on Wednesday.
The rupee ended at 83.33 against the US dollar, up by 0.08 per cent compared to its close of 83.40 in the previous session.
While the rupee had opened stronger at 83.2725, dollar demand from importers and oil companies ate into the local unit's gains, traders said.
"The rupee should have gained further... but right now it seems stuck between 83.25 and 83.40," a foreign exchange trader at a public sector bank said.
Local dollar demand is keeping gains at bay, but the rupee should rise to 83.20 gradually if cues remain supportive, the trader added.
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The domestic currency has hovered between 83.2475 and 83.4050 through December so far.
Asian currencies were up sharply on the back of a slump in US Treasury yields and the dollar index. The Thai baht and the South Korean won led gains, strengthening about 1.8 per cent each.
While the US central bank didn't tinker with policy rates on Wednesday, Fed Chair Jerome Powell stated that rates were unlikely to move higher and that policymakers were thinking about when it would be appropriate to lower them.
"I have always felt that there was a possibility the economy could avert recession while inflation came down, and so far that's what we are seeing," Powell said.
The 10-year US treasury yield fell to 3.93 per cent in Asia hours, its weakest level since July and the dollar index was lower by 0.3 per cent at 102.52.
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Although the global cues are supportive, "the rupee is not seeing any euphoria," Arnob Biswas, head of foreign exchange research at SMC Global Securities, said.
Investors now await policy decisions from the Bank of England and the European Central Bank, due later in the day.
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