The rupee pared initial gains and settled 3 paise lower at 83.27 against the US dollar on Thursday, following a recovery in the American currency.

Forex traders said the rupee consolidated in a narrow range as investors preferred to stay on the sidelines ahead of the Reserve Bank of India's rate decision.

At the interbank foreign exchange market, the rupee opened at 83.21 against the greenback and touched an intra-day low of 83.30 and a high of 83.16.

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It finally settled at 83.27, down 3 paise over its previous close of 83.24.

"The Indian rupee erased opening gains following recovery in the greenback but ended almost steady ahead of the US weekly jobless data and the RBI's rate decision," said Dilip Parmar, Research Analyst, HDFC Securities.

Parmar said the rupee was well supported by lower crude oil prices, the central bank's dollar supply and recovery in the domestic equity markets.

"Spot USDINR is expected to trade between 83.10 to 83.35 with the trend remaining sideways to bullish," he said.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 per cent lower at 106.79.

Global oil benchmark Brent crude futures dipped 0.97 per cent to $84.98 per barrel.

On the domestic equity market front, the 30-share BSE Sensex ended 405.53 points, or 0.62 per cent, higher at 65,631.57, while the broader NSE Nifty advanced 109.65 points, or 0.56 per cent, to 19,545.75.

Foreign institutional investors remained net sellers in the capital market on Wednesday, offloading shares worth Rs 4,424.02 crore, as per stock exchange data.