The Indian rupee was rangebound against the dollar on Tuesday as investors searched for fresh clues on direction, but kept a watchful eye on the central bank for signs of intervention.
The partially convertible rupee straddled a narrow band over the session, before ending at 44.205/220 per dollar, a touch stronger that Monday's close of 44.2325/2425.
"The market isn't sure about where things are headed at the moment. Everything is so very uncertain: when dollar-yen comes off, we're not sure if it's an unwinding of the carry trade, or whether it's the dollar losing ground. If the stock market goes up, we don't know it's sustainable," said the chief dealer at a foreign bank.
"No one is running any large positions because these are also levels where the RBI could come in," added the dealer, referring to the Reserve Bank of India's suspected moves in the currency market recently to weaken the rupee.
Data on Monday showed the central bank bought $2.8 billion in January. This was the third consecutive month it had intervened to rein in the rupee. The central bank bought about $5 billion in November and December.
The market suspects the central bank had intervened heavily in February, when the rupee rose to near 44, in part to ensure a stronger local currency does not hurt exports.