The rupee tumbled 23 paise to close at 74.06 against the U.S. dollar on Tuesday, as weaker Asian peers and massive sell-offs in domestic equities weighed on investor sentiment.
Besides, rising crude prices also put pressure on the rupee.
At the interbank foreign exchange market, the local currency opened at 73.79 and witnessed an intra-day high of 73.73 and a low of 74.12 against the U.S. dollar in day trade.
The local unit finally settled at 74.06 a dollar, down 23 paise over its previous close.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.26% higher at 93.62.
According to Dilip Parmar, Research Analyst, HDFC Securities the Indian rupee depreciated following global risk-off moods tracking cues from a sharp surge in bond yields ahead of Fed Powell’s testimony.
"The rise in global bond yields is likely to support safe-haven currencies as Powell may flag "upside risks" to inflation in his testimony. Looking ahead, a light data docket awaits, highlighted by the latest U.S. consumer confidence figures, while Fed Chair Powell heads to Capitol Hill," Mr. Parmar said.
Meanwhile, Brent crude futures, the global oil benchmark, advanced 0.89% to $80.24 per barrel.
On the domestic equity market front, the BSE Sensex ended 410.28 points or 0.68% lower at 59,667.60, while the broader NSE Nifty declined 106.50 points or 0.6% to 17,748.60.
"The Indian Rupee extended losses for the third straight session on Tuesday against the dollar, following further upside in long-term U.S. Treasury yields and soaring crude oil prices," said Sriram Iyer, Senior Research Analyst at Reliance Securities.
Emerging market and most Asian currencies also weakened this Tuesday, while weakness in the local equities also rubbed on the local unit.
In the overseas markets, the U.S. Dollar Index rose this afternoon trade in Asia tracking the rising bond yields.
U.S. Treasury yields have moved higher after three Fed officials on Monday solidified expectations that the U.S. central bank will begin reducing the pace of bond purchases at the November meeting.
"The rupee traded weak on the back of sell-off witnessed in capital markets majorly in Financial and IT. The crude and natural gas prices scaling new highs made the rupee weaker below 74.00," Jateen Trivedi, Senior Research Analyst at LKP Securities said, adding that going ahead the weak trend in the rupee can continue.
Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth ₹594.63 crore, as per exchange data.
