At 10:50 a.m., the partially convertible rupee was at 48.80/84 per dollar, off a high of 48.44, and weaker than Wednesday's close of 48.70/72.

"There is only some importer demand on Thursday but that too is very limited. Stocks would be the key, but other than that, the market is very thin as most overseas markets are shut for New Year," a senior dealer at a state-run bank said.

The Sensex was up about 1 percent but sharp gains were unlikely with little direction from world markets and thin institutional participation, after plunging more than half in 2008 in its biggest annual fall ever.

Foreign fund withdrawals of $13.3 billion from the stock market in 2008 was one of the key factors for the rupee's steepest yearly fall since a balance of payments crisis in the early 1990s.

India's current account deficit swelled to a record $12.54 billion in the September quarter and analysts warned on Wednesday it could balloon further as the world economy slows, putting pressure on the rupee.

Dealers said they would be watching inflation data around noon. Annual inflation is seen at a 10-month low of 6.38 percent in the third week of December as lower fuel prices feed into the economy and the cost of manufactured products slides, a Reuters poll showed on Wednesday.