The Indian rupee logged its worst day against the dollar in nearly three weeks on Wednesday, pressured by foreign outflows, while weakness in regional peers following hotter-than-expected inflation data in the United States also weighed.

The rupee closed at 82.8625 to the dollar, down from its previous close of 82.7675, recording its biggest single-session decline since Feb. 23.

The local unit was under pressure due to an outflow of around $2 billion pertaining to British American Tobacco's stake sale in Indian conglomerate ITC, traders said.

"The outflows because of a block deal is, of course, a temporary blip," said Jigar Trivedi, senior research analyst - currencies and commodities at Reliance Securities.

However, considering the weakness in the equity markets and the trend in the dollar index, the rupee may weaken to 83.00 and eventually to 83.20, he added.

Data released on Tuesday showed the U.S. consumer price index increased in February, topping analyst forecasts and indicating price pressures may be sticky.

Although the CPI rose 0.4% in February, in line with forecasts, the 3.2% year-on-year gain came in just ahead of an expected 3.1% increase. Core inflation also topped estimates.

Investors further reduced the possibility of a rate cut by the Federal Reserve in May. The possibility of a rate cut in next week's meeting is almost negligible. The U.S. central bank is set to meet next on March 19-20.

Most Asian currencies fell, with the Korean won dropping 0.4% following the U.S. data.

The dollar index climbed above 103, while U.S. Treasury yields extended their rise.

USD/INR forward premiums dropped with the one-year implied yield down five basis points at 1.65%. (Reporting by Siddhi Nayak; Editing by Sohini Goswami)