The rupee depreciated 12 paise to 83.56 against the US dollar in early trade on Tuesday, weighed down by the strengthening of the American currency in the overseas markets and elevated crude oil prices.
Forex traders said oil importers and foreign portfolio investors (FPIs) bought US dollars amid rising US yields, and this dragged down the local unit.
At the interbank foreign exchange market, the rupee opened at 83.51 and lost further ground to trade at 83.56 against the greenback in initial deals, registering a fall of 12 paise from its previous closing level.
On Monday, the rupee depreciated 10 paise to settle at 83.44 against the US dollar.
The rupee had dollar inflows and rose to 83.37 on Monday, but was sold-off to 83.44 levels, as oil and FPIs bought dollars looking at rising US yields, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
On Tuesday, rupee is likely to touch 83.55 before cooling off to 83.45, Bhansali said, adding that the narrow range for the day could be 83.40 to 83.55.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 105.91, higher by 0.02 per cent, following a surge in US treasury yields as investors contemplated a second Trump US presidency.
Brent crude futures, the global oil benchmark, advanced 0.22 per cent to USD 86.80 per barrel.
In the domestic equity market, benchmark indices, Sensex and Nifty, touched lifetime high levels in early trade. However, the indices pared the initial gains and were trading 64.46 points, or 0.08 per cent, lower at 79,411.73 points. The broader NSE Nifty fell 25.55 points, or 0.11 per cent, to 24,116.40 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 426.03 crore, according to exchange data.