In early trade on Wednesday, the rupee rose 2 paise to 83.35 against the US dollar, owing to a bullish trend in local equities and continuing foreign fund inflows. Forex traders said investors stayed on the sidelines ahead of the Reserve Bank of India's monetary policy decision later this week.

The rupee opened 2 paise higher at 83.35 against the dollar on the interbank foreign exchange, as domestic benchmark indices reached new lifetime highs. On Tuesday, the rupee finished at 83.37 against the dollar.

"The RBI's policy, which begins on Tuesday with a decision due on Friday, will be closely monitored," said Amit Pabari, MD of CR Forex Advisors.

In its monetary policy review, the Reserve Bank is likely to maintain the status quo on short-term interest rates. The Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, is set to begin its three-day deliberations on December 6. Das plans to reveal the MPC's judgment on December 8.

Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six currencies, was 0.11 percent lower at 103.93. Brent crude futures rose 0.12% to USD 77.29 a barrel, the global oil benchmark. The 30-share BSE Sensex was trading 269.23 points, or 0.39 percent, higher at 69,565.25 points in the domestic equity market. The NSE Nifty increased by 79.50 points, or 0.38 percent, to 20,934.60 points.

According to exchange data, Foreign Institutional Investors (FIIs) were net purchasers in the capital markets on Tuesday, purchasing shares worth Rs 5,223.51 crore.