The Indian rupee nudged higher on Wednesday as traders unwound long dollar positions, with the U.S. unit easing against majors.

The Indian rupee climbed to one-year highs on Wednesday buoyed by the dollar's broad-based fall and a stronger start to the stock market that could trigger more capital inflows.

The Indian rupee rose to fresh two-month highs in afternoon session on Monday helped by broad weakness in the dollar versus major units but a further rise was limited by lower domestic shares.

The Indian rupee is set to extend its gains in the remainder of 2009 after rising sharply this week following the ruling Congress-led coalition's decisive victory in the elections, a Reuters poll showed.

The Indian rupee rose to its highest level in 1-½ months on Monday as early gains in local shares raised expectations of capital inflows that would support the currency, with sentiment also underpinned by gains in other Asian currencies.