The rupee fell 28 paise to close at 81.70 against the US dollar on Tuesday amid stronger American currency and unabated foreign fund outflow.
However, lower crude prices capped the losses in the local unit, forex traders said.
At the interbank foreign exchange market, the rupee opened lower at 81.61 to a dollar against the previous close of 81.42.
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The domestic currency lost ground during the day and hit a low of 81.76 a dollar but moved up to the level of 81.43 before closing at 81.70 a dollar.
“Rupee traded weak at 81.65 down from 81.42 on the back of a rise in FII selling and forex outflows… Lower dollar price and some early gains in the capital market, however, kept losses in rupee limited…,” said Jateen Trivedi, VP Research Analyst at LKP Securities.
On Monday, the rupee had declined by 25 paise to close at 81.42 against the US dollar.
Meanwhile, the US dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.08 per cent to 102.22.
The Brent crude was trading 0.42 per cent lower at USD 87.82 per barrel.
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On the domestic equity market front, the 30-share BSE Sensex ended almost flat at 60,978.75, up 37.08 points or 0.06 per cent. The broader NSE Nifty inched up 0.25 points to close the session at 18,118.30.
Foreign Institutional Investors (FIIs) were net sellers in the capital market on Tuesday as they sold shares worth Rs 760.51 crore, according to exchange data.