NEW DELHI: The rupee slipped 3 paise to close at 95.40 (provisional) against the US dollar on Tuesday amid elevated crude oil prices and weakness in domestic equities.
Forex traders said a strengthening US dollar also put pressure on the domestic currency, but recent foreign fund inflows cushioned the fall.
At the interbank foreign exchange, the rupee opened at 95.35 against the greenback and traded in a tight range of 95.25-95.42 during the session. It eventually settled at 95.40, down 3 paise from its previous close.
On Monday, the rupee settled at 95.37 against the American currency.
"We expect the rupee to trade with a slight positive bias on improved global risk sentiments on de-escalation of tensions between the US and Iran. However, elevated crude oil prices and US treasury yields may pressurise the rupee at higher levels," said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.
Traders may take cues from JOLTS job openings data from the US. USD/INR spot price is expected to trade in a range of 94.95 to 95.60, Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 100.02, up 0.13 per cent.
Brent crude, the global oil benchmark, jumped 2.72 per cent to USD 86.05 per barrel in futures trade.
On the domestic equity market front, Sensex fell 210.08 points to settle at 78,428.95, and the Nifty slipped 159.40 points to 24,614.90.
Foreign Institutional Investors purchased equities worth Rs 922.26 crore on a net basis on Monday, according to exchange data.
Forex traders said attention has now shifted to this week's RBI policy meeting.
"Measures announced in the previous policy, including incentives for overseas dollar deposits and easier access to government bonds for foreign participants, have helped attract nearly USD 40 billion of inflows, providing additional support to India's external position," CR Forex Advisors MD Amit Pabari said.
The three-day meeting of the Reserve Bank of India's rate-setting panel started on Monday amid expectations of a status quo on the benchmark repo rate, with the Monetary Policy Committee slated to announce its decision on August 5.
In June, the Reserve Bank had kept its key policy rate unchanged at 5.25 per cent and adopted a cautious wait-and-watch stance as policymakers assessed the fallout of the West Asia conflict.