The rupee settled 21 paise lower at 83.39 (provisional) against the US dollar on Wednesday, tracking a negative trend in domestic equities and elevated crude oil prices.
Forex traders said dollar demand from importers and oil marketing companies (OMCs) also weighed on the rupee.
However, foreign inflows in the bond markets ahead of the inclusion of India's government bonds in the global bond index has cushioned the downside.
At the interbank foreign exchange market, the local unit opened at 83.22 and finally settled for the day at 83.39 (provisional), down 21 paise from its previous close.
On Tuesday, the rupee pared initial gains to settle 5 paise lower at 83.18 against the US dollar.
"We expect the rupee to trade with a slight negative bias on month-end dollar demand from OMCs and importers to meet their obligations. Risk aversion in global markets and a strong US dollar may further pressurise the rupee," said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
However, fresh foreign inflows in FPIs and bond markets may support the rupee at lower levels.
Traders may take cues from Richmond manufacturing index and speeches from US Fed officials. Investors may remain cautious ahead of the core PCE price index data later this week, Choudhary added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 104.67, higher by 0.05 per cent, on hawkish Fed speak and upbeat economic data from the US.
Brent crude futures, the global oil benchmark, rose 0.78 per cent to $84.88 per barrel.
On the domestic equity market, the 30-share BSE Sensex declined 667.55 points, or 0.89 per cent, to close at 74,502.90 points. The broader NSE Nifty fell 183.45 points, or 0.8 per cent, to close at 22,704.70 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Tuesday, as they purchased shares worth ₹65.57 crore, according to exchange data.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.