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The Indian rupee inched higher versus the greenback on Wednesday, managing to hold on to its lead against Asian peers this week on a rebound in foreign inflows and dollar sales by exporters.

The rupee was trading at 79.77 per U.S. dollar, up from 79.8625 in the previous session. Since the beginning of last week, the local currency is down 0.15%.

In comparison, the offshore Chinese yuan has declined almost 2%, the Korean won has tumbled 3% and the Indonesian rupiah is down 1.2%.

Asian currencies have struggled on the back of an interest rate cut by the Chinese central bank and worries that the Federal Reserve will stick to its hawkish stance for longer. The dollar index has surged almost 3% since last Monday.

The rupee's outperformance can be attributed to foreign equity portfolio inflows and expectations that the Reserve Bank of India will protect the 80 level, said Anindya Banerjee, head research - fx and interest rates at Kotak Securities.

Foreign inflows into Indian equities this month have reached over $5 billion. This compares to the $28 billion of outflows seen in the first half of the year.

Meanwhile, the RBI has been drawing down reserves to prevent excess volatility in the rupee. India's foreign exchange reserves have fallen to their lowest level since November 2020.

A spot and forwards trader at a Mumbai-based private sector bank said that persistent dollar offers from exporters to lock in a higher forward rate amid a fairly stable rupee is keeping the dollar from climbing above 80.

"Importers are using the record high (on dollar) of 80.0650 as a stop loss and waiting."