The rupee declined 12 paise to 79.06 against the US dollar in early trade on Thursday as the hawkish stance of the US Federal Reserve increased the possibility of another rate hike this month.
According to forex traders, the steps announced by the Reserve Bank of India RBI on Wednesday limited the depreciation bias in the rupee.
The rupee opened against the American dollar at 79.05, then lost ground to quote at 79.06, registering a drop of 12 paise from the last close.
The rupee saw a high of 78.90 against the American currency in initial trade.
The rupee closed against the US dollar at 78.94 on Wednesday.
The RBI took several steps to boost forex inflows to prevent rupee's fall, said Sriram Iyer, Senior Research Analyst at Reliance Securities.
It will be difficult to find out about the quantum of flows that come into the markets, but the measures could provide some stability to the rupee, Iyer noted.
Iyer said the US Federal Reserve's minutes of the meeting last month indicated a hawkish stance as a rate hike of 75 basis points is likely in July.
The minutes were released on Wednesday.
The dollar index, which measures the strength of the dollar against a basket of six currencies, was trading 0.21 per cent higher at 106.87.
The global oil benchmark Brent crude futures rose 0.78 per cent to USD 101.48 per barrel.
On Thursday, the 30 share Sensex was trading at 54,068, or 317.33 points or 0.59 per cent higher on the domestic equity market. The broader NSE Nifty rose by 95.95 points or 0.6 per cent to 16,085, while the broader NSE Nifty rose by 30 points or 0.6 per cent. 75 points.
The RBI on Wednesday raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a series of measures to boost foreign exchange inflows in order to curb the fall of the rupee.
The central bank has been closely monitoring the liquidity conditions in the forex market, and has stepped in as needed to alleviate dollar tightness with the goal of orderly market functioning.