The rupee opened stronger at 55.44 level against the dollar on Wednesday after closing at 55.62 level on Tuesday. It strengthened to its highest in more than a week to 55.27 levels this week, tracking a slight revival in risk-taking in other Asian markets. The dollar index declined to 82.57 levels with treasury yield rising back to 1.59%.

The rupee is seen trading below 56 levels from last few sessions and signs of topping out at 56.50 at least in short term is evident. The market seems to be in a range of 55 – 56 levels ahead of the major events, internationally and domestically.

"It has been few days now since the rupee has seen appreciating and not making new lows despite of poor fundamentals. It seems a short-term top has been made at 56.50 level. Slight correction looks possible. The market seems to have strong support of 54.80 and 54.50 levels. Importers are suggested to cover their open exposure on dips near 55.00 and below while exporters were recommended to cover at least 40% - 50% for next 2-3 months at 55.50 plus levels," said Abhishek Goenka, founder and CEO of India Forex Advisors.

On Tuesday Indian Commerce Minister announced the Foreign Trade Policy. It included extension of import-tax waiver and interest subsidy, to boost India's merchandise exports that have been hit by sluggish demand from Europe and US. Exports rose only 3.2% in April from a year ago.

The foreign trade policy 2009-14 has set a target of $500 billion exports. The main focus of the FTP includes encouraging import substitution that will help to bring down the trade deficit.

With no major announcement from G7 meeting, the eyes will be on the ECB monthly rate setting meeting today. The IMF chief Lagarde indicated that the ECB has room to cut rates, adding to speculation ahead of tonight's meeting.

Bond yields rose in early trade on Tuesday after the government said it will sell a new 10-year bond this week. The yield for the current 10-year benchmark rose up by 4 bps to 8.38%. The RBI made the announcement that India will sell 150 billion rupees ($2.7 billion) of debt on Friday, including 70 billion rupees of a new 10-year bond. The 10-year yield is seen between 8.30-8.40%.tightness.