The rupee traded in a narrow range and settled for the day higher by just 1 paisa at 83.96 (provisional) against the US dollar on Wednesday, after the Reserve Bank of India kept its key interest rate unchanged and shifted its stance to 'neutral' that may lead to a cut in benchmark rates in forthcoming policies.

Forex traders said the Reserve Bank's monetary policy action was in line with street expectations. Moreover, a muted trend in domestic markets and positive US dollar weighed on investor sentiments.

At the interbank foreign exchange market, the local unit opened at 83.92 and finally settled for the day at 83.96 (provisional), higher by 1 paisa over its previous close of 83.97 against the dollar.

The Reserve Bank of India on Wednesday kept the policy rate unchanged for the tenth time in a row but shifted its stance from 'withdrawal of accommodation' to 'neutral' that may lead to a cut in the forthcoming policies.

The monetary policy committee, which included three RBI officials and an equal number of new external members, voted five-to-one to keep the benchmark repurchase or repo rate -- which governs the interest rate of home, auto, corporate and other loans -- at 6.5 per cent for a 10th straight policy meeting.

The Indian rupee remained steady as the Reserve Bank of India (RBI) left repo rate and CRR unchanged at 6.5 per cent and 4.5 per cent, respectively, in line with street expectations, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

"We expect the rupee to trade with a negative bias on selling pressure from FIIs and geopolitical tensions in the Middle East. A strong US dollar may further pressurise the rupee.

"Dollar is trading at the highest levels in 8 weeks. However, a recovery in the domestic markets and weak crude oil prices may support the rupee at lower levels, Choudhary said, adding that traders may take cues from the Federal Open Market Committee (FOMC) meeting minutes which will indicate Fed's further rate cut path.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was up 0.09 per cent to 102.63 points.

Brent crude, the international benchmark, gained 0.82 per cent to USD 77.81 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex declined 167.71 points, or 0.21 per cent, to close at 81,467.10 points, while the Nifty was down 31.20 points, or 0.12 per cent, to 24,981.95 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, as they offloaded shares worth Rs 5,729.60 crore, according to exchange data.

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