The Indian rupee is poised to open higher on Wednesday, adding to its recovery over the last two days that was fuelled largely by heavy intervention by the central bank.

The 1-month non-deliverable forward indicated that the rupee will open at 86.70-86.75 to the U.S. dollar compared with 86.8275 in the previous session.

The Indian currency dropped to an all-time low of 87.95 at the open on Monday, prompting the central bank to step in aggressively.

The Reserve Bank of India (RBI) sold dollars heavily before the local spot market opened on Monday and Tuesday and maintained the pace of intervention post that.

Estimates about the size of the intervention over the two days range from USD 8 billion to USD 11 billion. Bearish wagers on the rupee, caught by the extent of the intervention, had to exit, further aiding the rally in the Indian currency.

It is "no exaggeration" that the RBI has "for now broken the back of" speculators by its "unprecedented" intervention, a currency trader at a bank said.

"I would think that a large portion of the positions, at least locally, have been cut. We are now at a neutral setting."

Trump tariffs

The rupee will draw comfort from the muted reaction to U.S. President Donald Trump's latest tariffs. The dollar has not able to rally on news about the levies and U.S. risk appetite remains firm.

The dollar index dropped 0.4% on Monday to below 108. That is despite Federal Reserve Chair Jerome Powell saying that the U.S. central bank is not in a rush to cut interest rates.

U.S. consumer inflation data for January, due later in the day, will help investors gauge when the next rate cut is likely.

The data is expected to show core inflation stayed elevated and that, combined with tariff uncertainty, could keep the Fed patient with rate cuts, MUFG Bank said in a note.