India's Rupee closed Wednesday marginally higher against the Dollar, ending a three-day decline, as the central bank hiked interest rates and adopted a hawkish stance against inflation.

The Rupee stood at 82.47 per Dollar at the time of writing, compared to the previous close of 82.6150. In the last three sessions, the Rupee edged down 1.7%.

The Reserve Bank of India (RBI) increased the repo rate by 35 basis points to 6.25%, the fifth consecutive increase, and said further increases are on the cards in order to curb inflation, Reuters news agency reports.

As well as maintaining its hawkish stance of "withdrawal of accommodation," the monetary policy committee also signalled at further monetary tightening in future when additional calibrated monetary policy action is justified, according to Pranjul Bhandari, chief India and Indonesia economist at HSBC.

"We believe stability of the Rupee will be in focus in 2023, and the RBI could potentially take a wide variety of steps, including monetary policy ones if the Rupee comes under pressure."

With inflation exceeding the central bank's target range of 4% to 6%, a 25-basis point hike is forecast in February next year, Bhandari added.

This year, the Rupee has fallen around 11% against the greenback, mainly in line with emerging market rivals.

That said, the sudden drop over the last three days from 81.30 per Dollar to 82.50 sparked concerns amongst traders who forecast a further fall and ensuing central bank intervention.

"The RBI's continued emphasis on the factors that lend support to the Rupee signals its preference for a stable Rupee going forward, implying intervention on both sides of the market to keep it range-bound into 2023," stated HDFC Bank economists.

Markets are now focused on domestic inflation data and the upcoming Federal Reserve meeting next week to determine the currency's trajectory.