MUMBAI: The Indian rupee edged higher against the U.S. currency on Wednesday, propped up by a slide in oil prices and the dollar index.

The partially convertible rupee closed at 82.8025 per dollar, having firmed to as much as 82.75 during the session. It ended at 82.88 on Tuesday.

The rupee’s fortunes lie with the dollar index now, since persistent domestic dollar demand and technical trends indicate the rupee could test the 83 mark, although the central banks’ likely presence around 82.90 has protected it, said a trader with a private bank.

The rupee almost weakened to 83 in the previous session but shied away due to the Reserve Bank of India’s suspected dollar sales via public sector banks.

The Indian unit’s narrow 82.40 to 82.94 range over the last three weeks has sparked worries of a large directional move and a jump in volatility, analysts said.

On Wednesday, the dollar index fell 0.7% to 103.980.

Indian rupee ends down more than 10% in 2022, worst since 2013

China’s finance minister pledged to step up fiscal expansion this year and seasonal demand for the yuan pushed up the Chinese currency, which in turn boosted regional peers.

Meanwhile, Brent crude futures dived for a second straight session, to a two-week low, on growing concerns about weak global economic conditions hitting demand.

Markets are awaiting the minutes of the Federal Reserve’s December meeting, due during U.S. trading hours, to gauge the central bank’s future rate-hike path, which could make monetary conditions even tighter.

However, in India, services industry activity increased at the fastest pace in six months in December amid robust demand, a private-sector survey showed.

“Even as the global growth outlook appears dimmer, we believe India’s economic outperformance may continue,” wrote Barclays analysts in a note.

“We think the economy may experience something of a soft landing in 2023, with GDP growth moving from 7.0% in fiscal 2023 to 6.0% in fiscal 2024.”