The rupee ended at 45.155/165 per dollar, off a session low of 45.195 and nearly unchanged compared to Wednesday's 45.15/16 close.
Overseas portfolio investors have bought a record of $10.6 billion of Indian stocks this year, cushioning downward pressure on the rupee from a widening trade deficit and the dollar's gains against the yen and euro.
"The market is a little cautious as no one wants to run up large positions on either side (long or short of the dollar) till the uncertainty over the IMD redemptions is completely out of the way," a chief dealer at a foreign bank said, referring to the India Millennium Deposit (IMD) scheme aimed at expatriates.
The Reserve Bank of India said on Wednesday it would sell nearly $2 billion from its forex reserves to SBI on Thursday.
Federal bond prices ended steady after rising for the previous two sessions, as cash outflows towards the IMD redemption kept overnight borrowing costs high.
The overnight call money rate finished at 7.15/7.25 percent, up from Wednesday's 6.85/7.05 percent close and the normal band of 5.25/5.50 percent.
The yield on the actively traded 8.07 percent 12-year bond closed at 7.1980 percent, little changed from Wednesday's 7.1994 percent.