The rupee pared initial gains and settled 2 paise lower at 81.90 (provisional) against the US dollar on Wednesday after Finance Minister Nirmala Sitharaman presented the Union Budget for 2023-24.

Forex traders said investors stayed on the sidelines, as they are waiting for the outcome of the US Federal Reserve meeting later in the evening.

At the interbank foreign exchange market, the rupee opened at 81.76 against the greenback and finally settled at 81.90, down 2 paise over its previous close.

During the session, the rupee touched an intraday high of 81.68 and a low of 82.03 against the American currency.

On Tuesday, the rupee depreciated by 36 paise to close at a three-week low of 81.88 against the US dollar after the Economic Survey 2022-23 said the domestic unit may remain under pressure on account of plateauing of exports and subsequent widening of the current account deficit.

Sitharaman in her Budget speech retained the country's fiscal deficit target of 6.4 pc in the Revised Estimate for FY23 and cut it to 5.9 per cent for FY24.

She said that the fiscal deficit is to be brought down to below 4.5 pc by 2025-26.

"This led to some strengthening of the Rupee earlier in the day," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

The government's fiscal deficit as of December-end touched 59.8 per cent of the full-year Budget Estimate on subdued growth in revenue collections, according to finance ministry data released on Tuesday.

"Soft Dollar and a fiscally prudent budget may prevent a sharp fall in the Rupee. Market participants may remain cautious ahead of ISM manufacturing PMI, JOLTS job openings and FOMC meeting outcome," Choudhary said, adding that the Fed is expected to hike interest rates by 25 bps.

India's manufacturing sector activity moderated in January amid a slower increase in total sales, and headcounts were broadly unchanged amid sufficient staff numbers to cope with current requirements, according to a monthly survey.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell from December's recent high of 57.8 to 55.4 in January, as factory orders and production rose at a slower pace.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.14 per cent lower at 101.95.

Global oil benchmark Brent crude futures declined 0.26 per cent to USD 85.24 per barrel.

"Indian Rupee depreciated on late sell-off in domestic markets and expectations of outflows by FIIs. Overnight gains in crude oil prices also weighed on Rupee," Choudhary said.

The 30-share BSE Sensex ended 187.31 points or 0.31 per cent higher at 59,708.08, while the broader NSE Nifty declined 45.85 points or 0.26 per cent to 17,616.30.

Foreign Institutional Investors (FIIs) were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 5,439.64 crore, according to exchange data.

Except for the headline, this story has not been edited by The Telegraph Online staff and has been published from a syndicated feed.