The rupee declined 16 paise to settle at 83.35 (provisional) against the US dollar on Wednesday due to sustained outflow of foreign funds and increased demand for American currency from importers and banks.
According to forex traders, a robust buying trend in the domestic equity market failed to boost sentiment as investors remained concerned over volatile crude oil prices fearing disruption in global trade through the Red Sea route.
At the interbank foreign exchange, the domestic currency opened at 83.21 and traded between the peak of 83.20 and the lowest level of 83.35 against dollar during intra-day deals. The local unit finally settled at 83.35 (provisional) against the greenback, registering a fall of 16 paise from its previous close.
On Tuesday, the domestic currency settled at 83.19 against the dollar.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said Indian rupee depreciated on dollar demand from foreign banks and importers.
"FII outflows also weighed on the rupee. However, positive domestic markets and the weak tone in the US dollar cushioned the downside," he said but added that the rupee is expected to trade with a slight negative bias on month-end dollar demand from oil marketing companies and importers.
"USD-INR spot price is expected to trade in a range of Rs 83 to Rs 83.70," he said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading marginally lower at 101.07 on Wednesday.
Global oil price benchmark Brent crude slipped 0.16 per cent to USD 80.94 per barrel.
In the domestic equity market, the 30-share BSE Sensex jumped 701.63 points or 0.98 per cent to settle at a fresh peak of 72,038.43 points. The broader NSE Nifty soared 213.40 points or 1 per cent to 21,654.75 points.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 95.20 crore on Tuesday, according to exchange data.