Mumbai

The rupee depreciated by 11 paise to close at 94.74 (provisional) against the US dollar on Tuesday, pressured by a stronger greenback and weakness in domestic equity markets, even as softer crude oil prices helped limit losses.

In the interbank foreign exchange market, the rupee opened at 94.73 and moved within a range of 94.63 to 94.92 before settling at 94.74, down from its previous close of 94.63 on Monday.

Forex traders said importer hedging demand added further pressure on the domestic currency. However, easing crude oil prices and a slight softening in US Treasury yields provided partial support, preventing a sharper decline.

According to analysts, geopolitical developments and monetary policy expectations in the United States continued to influence currency movements.

"The rupee declined on a firm US dollar and weak domestic markets. Importer demand for hedging also weighed on the domestic currency. However, falling crude oil prices and softening of US treasury yields cushioned the downside," said Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan.

He added that expectations of a hawkish stance from the US Federal Reserve could keep the dollar strong, maintaining pressure on the rupee in the near term.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said the rupee is likely to trade in a narrow range between 94.60 and 94.95 in the short term.

He noted that future movement of the currency would depend significantly on foreign currency non-resident (FCNR-B) deposit inflows into Indian banks. A strong mobilisation under the scheme could support rupee appreciation over time, especially if accompanied by sustained low crude oil prices.

Despite near-term volatility, experts believe there is limited risk of sharp depreciation at this stage.

Meanwhile, the dollar index, which measures the US currency against a basket of six major currencies, was trading higher at 101.09, reflecting continued strength amid global uncertainties and Federal Reserve policy signals.

Brent crude prices fell by 0.54 per cent to USD 77.48 per barrel, offering some relief to import-dependent economies like India.

On the domestic equity front, markets witnessed a sharp decline. The Sensex fell 893.39 points (1.16 per cent) to close at 76,200.68, while the Nifty dropped 278.80 points (1.16 per cent) to end at 23,824.10.

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Foreign institutional investors were net sellers, offloading equities worth Rs 635.91 crore on Monday, according to exchange data.