Mumbai, Oct 22 (PTI) The rupee on Tuesday settled just 1 paisa lower at 84.08 against the US dollar, tracking an intense selloff in domestic equity markets and unabated outflow of foreign funds.
The local unit was also weighed down by elevated crude oil prices and firm American currency amid rising US treasury yields, forex traders said.
At the interbank foreign exchange market, the domestic unit opened at 84.07 against the greenback and witnessed a restricted movement between 84.06 and 84.08 during the session. The unit finally settled at 84.08 against the US dollar, a fall of just 1 paisa over its previous close.
On Monday, the rupee settled flat at 84.07 against the US dollar.
Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said the dollar strength and continued weakness in the Indian capital markets exerted pressure on the rupee.
The selloff in the Indian markets and fund outflows were driven by the global shift in the interest rate cycle, while the RBI maintained its stance of not reversing rates, he added.
The local currency has been struggling to recover since October 11, when it closed at its lowest level of 84.10 against the dollar.
According to analysts, the rupee has been under pressure due to the continuous selling of Indian equities by FIIs in pursuit of better gains from the Chinese market.
Also, they said, a surge in the US treasury yields raised concerns about slower rate cuts by the Federal Reserve, steering investors towards safe-haven assets.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said the rupee traded on a flat note amid weak domestic markets and a surge in US treasury yields. However, reports of the RBI interventions supported the rupee at lower levels.
"Investors may take cues from PMI data from the US this week. USD-INR spot price is expected to trade in a range of Rs 83.90 to Rs 84.30," he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell marginally by 0.07 per cent to 103.76.
Brent crude, the international benchmark, rose 0.79 per cent to USD 74.88 per barrel in futures trade.
On the domestic equity market front, Sensex tumbled 930.55 points, or 1.15 per cent, to settle at 80,220.72 points. The Nifty also tanked 309.00 points, or 1.25 per cent, to 24,472.10 points.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Tuesday, as they offloaded shares worth Rs 3,978.61 crore, according to exchange data.