The market expects higher seasonal imports and a pick-up in motor vehicle buying after taxes were slashed in last week's budget, they said.

The spot rupee, which earlier hit a low of 153.85, closed at 153.75/80 per dollar, compared with Monday's close of 153.70/80.

"Since there is a New York holiday on Wednesday, the currency was a bit heavily traded. Some importer demand for dollars was met with exporter conversions," a dealer said, asking not to be named.

Though the rupee is under downward pressure, it may not fall as much as the market had previously expected, dealers said.

The market had expected a 4 percent fall in the currency for 2017, while the currency has slipped 2.8 percent so far in the year.

The market expects the currency to be under pressure with people importing more lower-end vehicles on which the government has already reduced taxes.

The government imposed new taxes on high-end motor vehicles, telecoms, banks and liquor in a bid to boost revenues in its 2018 budget outlined on Nov. 9, as the budget deficit for the current year slipped to 5.2 percent of GDP.

Foreign investors were net buyers of equities worth 19.7 billion rupees ($128.13 million) this year as of Tuesday's close. They were net buyers of government securities worth 45.7 billion rupees as of Nov. 15, official data showed.