The rupee depreciated 16 paise and settled at 73.87 against the US dollar on Wednesday as heavy selling in the domestic equity market and strengthening American currency weighed on investor sentiment.
At the interbank forex market, the rupee opened on a positive note at 73.70 against the greenback, but soon pared the gains and closed for the day at 73.87, registering a decline of 16 paise over its previous close of 73.71.
In a volatile trading session, the domestic unit witnessed an intra-day high of 73.64 and a low of 73.93 against the US currency.
"The toxic brew of no US fiscal stimulus and rapidly rising coronavirus cases are dwindling market sentiments, especially ahead of the US election event risk,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further said that the spot is not breaking the psychological level 74, the odds of spot going beyond 74 remains high as market volatility has started to rise.
"The looming uncertainty over the US Presidential election outcome will keep USD-INR afloat, but until it is below the 74 mark, we may expect it to trade in between 73.40-74. Only a consistent trading above 74, will push prices towards 74.20 zone,” he said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.41 percent to 93.31.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 633.96 points lower at 39,888.14, and the broader NSE Nifty was trading 70 points down at 11,719.40.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 3,514.89 crore on Tuesday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 3.16 percent to $39.30 per barrel.