The rupee depreciated by 29 paise to 73.64 against the US dollar in opening deals on Tuesday, amid a rise in demand for the American currency from banks and importers. Forex traders said strength in the dollar and foreign fund outflows weighed on the rupee. At the interbank forex market, the rupee started off on a tepid note at 73.63, and declined to as low as 73.64 against the greenback, down 29 paise compared to its previous close.
The rupee traded in a narrow band of 73.54-73.64 against the US dollar in early trade. On Monday, it had settled at 73.35 against the American currency.
"US markets were shut on account of Labour Day and therefore there are no overnight cues to follow. We are seeing the US nominal yields firm up and we are seeing US dollar strength in pockets," said Abhishek Goenka, founder and CEO, IFA Global.
"If the broader dollar remains stable, the downside in USD-INR could be limited. It appears the central bank is content keeping volatility in check and allowing readjustments in USD-INR happen when there is a significant global dollar move," Mr Goenka added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.44 per cent to 93.12.
On the domestic equity market front, the S&P BSE Sensex index jumped 261.6 points - or 0.68 per cent - to 38,678.83 at the strongest level recorded in mid-morning deals, and the broader NSE Nifty 50 benchmark climbed to as high as 11,419.65, up 64.6 points - or 0.57 per cent - from its previous close.
Foreign institutional investors were net sellers in the domestic capital market, net selling shares worth Rs 6.93 crore on Monday, according to exchange data.
Brent crude futures - the global benchmark for oil prices - fell 0.12 per cent to $41.96 per barrel.