MUMBAI: The rupee declined 8 paise to settle at 96.43 (provisional) against the US dollar on Tuesday amid sustained outflows of foreign capital and uncertainties over a US-Iran deal.
However, a drop in global crude oil prices and a weaker greenback capped the rupee's fall, according to forex traders.
At the interbank foreign exchange, the rupee opened at 96.29 and traded in the range of 96.29-96.45 before eventually settling at 96.43 (provisional), down 8 paise from its previous close.
The rupee depreciated 10 paise to close at 96.35 against the US dollar on Monday.
"The rupee traded on a weak note but recovered from day's lows on sharp fall in crude oil prices and softening of US dollar and US treasury yields," Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan, said.
"We expect the rupee to trade with a negative bias on uncertainty over the US and Iran deal and elevated dollar and US treasury yields. However, softening of crude oil prices and trimming odds of a rate hike by the Fed in October may support the rupee at lower levels," he said, adding that the USD-INR spot price is expected to trade in a range of Rs 96.15 to Rs 96.60.
The Reserve Bank's Monetary Policy Committee began its three-day meeting on Monday and is likely to announce a 25 basis point rate hike on Wednesday, in line with other central banks' hawkish stance amid escalating conflict in West Asia that poses risks for domestic inflation.
The last repo rate hike was in February 2023, when the RBI raised the rate by 0.25 per cent to 6.50 per cent. It kept the rate unchanged through 2023-24 before beginning its rate-cut cycle in 2025. Currently, the RBI's policy repo rate stands at 5.25 per cent.
Meanwhile, the dollar index, which gauges the strength of the greenback against a basket of six currencies, was trading at 102.03, lower by 0.13 per cent.
Brent crude, the global oil benchmark, was trading lower by 1.68 per cent at USD 98.63 per barrel in futures trade.
On the domestic equity market front, Sensex jumped 685.34 points to settle at 73,067.81, while the Nifty rose 220.35 points to 22,776.10.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 4,699.14 crore on a net basis on Monday, according to exchange data.