The Indian rupee is likely to inch up against the dollar on Wednesday, helped by the decline in the USD/INR non-deliverable forwards (NDF).

The rupee is expected to open at around 81.60 compared with 81.76 in the previous session. Over the last two sessions, the local currency has come under pressure on dollar purchases from public sector banks and on position adjustments by speculators.

The USD/INR 1-month NDF declined after normal over-the-counter market hours on Tuesday, hovering near 81.70. On the interbank order match system, rupee was last dealt at 81.60.

The rupee, taking cues from NDF, should inch up at open, but is unlikely to do much after that considering the Asian cues, a trader at a Mumbai-based bank said. It looks like the rupee is now in a new range of 81.20 to 82.00, they added.

Moat Asian currencies were slightly weaker on the day. The offshore Chinese yuan dropped to 6.78 to the dollar while the Japanese yen dropped to near 128.50.

Investors await the highly anticipated Bank of Japan policy decision. The central bank took the market by surprise last month by raising its cap on the 10-year yield to 0.5% from 0.25%, doubling the band it would permit above or below its zero-percent target.

There is a possibility that the BoJ may altogether abandon the yield curve control.

"Our base case is for a hold, but with low conviction, and see a significant risk that the central bank announces the end of Yield Curve Control," BofA Securities said in a note.

"The dysfunction in the bond markets that prompted December's YCC modifications have gotten significantly worse."

Japanese equities were slightly higher ahead of the policy decision. Other Asian equity gauges were mixed while U.S. futures were slightly lower. (Reporting by Nimesh Vora; Editing by Janane Venkatraman)