The Indian rupee was unable to hold on to its positive opening versus the U.S. currency on dollar demand from foreign banks, likely for the custodial clients, traders said on Wednesday.

The rupee declined to 82.5025 to the dollar after opening at 82.31 and compared to 82.49 in the previous session.

"This is all fixing related. On why foreign banks are buying dollars at the fix, it is most likely related to their custodial clients," a trader at a public sector bank said.

"Another possibility is that it could be related to NDF (non-deliverable forward)."

The daily rupee reference rate published by the Reserve Bank of India is used to settle non-deliverable forward contracts.

The rupee daily fix traded as high as 1 paisa premium, according to several bankers. On most days, the fix would trade around par levels.

Most of the orders related to fixing are done by 12 noon, another trader said.

"It will not be a surprise if the pair (USD/INR) comes off once the fix orders are out of the way." (Reporting by Nimesh Vora; editing by Eileen Soreng)