The rupee was trading in a narrow range against the US dollar in early trade on Wednesday, as market participants remained cautious ahead of the interim budget that will be released on February 1.

Forex traders said the rupee was trading in a narrow range as the strength of the American currency in the overseas market and foreign fund outflows weighed on investor sentiments.

At the interbank foreign exchange, the rupee opened at 83.11 against the dollar and then touched a high of 83.10, and a low of 83.12.

On Tuesday, the rupee appreciated 6 paise to settle at 83.10 against the US dollar.

"Rupee traded in a narrow range and market participants remained cautious ahead of the interim budget that will be released on Thursday," said Gaurang Somaiya, forex and bullion analyst Motilal Oswal Financial services.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.21 per cent higher at 103.61.

"Dollar index remained firm against its major crosses ahead of the two-day FOMC meeting starting tonight. Fed is broadly expected to hold rates steady once more but markets will be paying close attention to Jerome Powell’s comments, important to gauge for the dollar," Somaiya added.

Brent crude futures, the global oil benchmark, fell 0.43 per cent to USD 82.51 per barrel.

"We expect the USDINR(Spot) to trade sideways and quote in the range of 82.90 and 83.30," Somaiya said.

In the domestic equity market, the 30-share BSE Sensex was trading 108.97 points or 0.15 per cent higher at 71,248.87. The broader NSE Nifty advanced 37.55 points or 0.17 per cent to 21,559.65 .

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth Rs 1,970.52 crore, according to exchange data.

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