The rupee ended the day with marginal movement against the US dollar, as early gains were offset by dollar demand from state-run banks. The rupee closed at 83.1150 versus the US dollar, showing minimal change compared to the previous session's close at 83.1375.

The initial optimism stemmed from positive sentiment following a proposal to include eligible Indian bonds in the Bloomberg Emerging Market Local Currency Index, as suggested by Bloomberg Index Services on Monday. Despite an intraday high of 83.0450, the rupee faced resistance due to dollar demand from state-run banks.

Market participants noted that there is confidence in the rupee holding around the 83.00 level, leading to intraday buying of the dollar. The dollar index saw a slight uptick to 102.35, while several Asian currencies experienced modest gains, with the Thai baht leading with a 0.4 per cent rise.

Analysts believe the rupee has room for further appreciation, supported by favourable global cues. However, factors such as dollar demand from oil companies and potential absorption of inflows by the Reserve Bank of India are limiting the rupee's gains, according to Abhilash Koikkara, Head of Forex and Rates at Nuvama Professional Clients Group.

Investor focus is now on the upcoming key US consumer inflation data scheduled for Thursday, which is expected to influence expectations regarding potential changes in policy rates in the world's largest economy. The forecast for month-on-month core Consumer Price Index (CPI) inflation in December is steady at 0.3 per cent, as per a Reuters poll. Market participants are currently pricing a 42 per cent chance that the Federal Reserve will maintain policy rates in March, up from 21 per cent a week earlier, according to CME Group's FedWatch tool.

(With Reuters inputs)