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The Indian rupee is likely to open steady on Wednesday but may face pressure during the session after the dollar index hit an over one-month high as investors pared U.S. rate cut expectations following the comments from U.S Federal Reserve Governor Christopher Waller.

Non-deliverable forwards indicate the rupee will open at around 83.08 against the U.S. dollar, barely changed from its close at 83.07 in the previous session.

The dollar index was at 103.3 after a 0.6% rise on Tuesday, marking its sharpest single-day gain in over two weeks. Most Asian currencies fell, with the Korean won leading losses with a 0.7% decline.

"With (U.S.) economic activity and labour markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past," Fed Governor Waller said on Tuesday, signalling a pushback against aggressive rate cut expectations.

The comments prompted a moderation in bets on U.S. rate cuts, with investors pricing in a nearly 67% chance of a rate cut in March, down from 81% on Friday.

"The important takeaways are that the bar to Fed rate hikes are high ... the open question is really about the pace and perhaps also timing," MUFG Bank stated in a note.

U.S. Treasury yields climbed, with the 10-year yield rising 11 basis points to 4.06% on Tuesday, while the 2-year yield also rose to 4.22%.

The dollar-rupee pair is likely to open with a strong buying interest, and there is a possibility of a potential "dollar short squeeze" which could lead to a move towards 83.25, a foreign exchange trader at a private bank said.

The local unit, which strengthened over 0.1% in January, snapped its nine-day winning run on Tuesday amid a broadly stronger dollar and a risk-off sentiment in regional markets.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.18; onshore one-month forward premium at 10 paisa

** Dollar index at 103.31

** Brent crude futures down 0.5% at $77.9 per barrel

** Ten-year U.S. note yield at 4.04%

** As per NSDL data, foreign investors bought a net $243.2mln worth of Indian shares on Jan. 15

** NSDL data shows foreign investors bought a net $77.7mln worth of Indian bonds on Jan. 15