The Indian rupee furthered its weakening trend for a third session in a row on Wednesday, edging lower by 4 paise to 68.98 against the US dollar as foreign fund outflows and higher crude oil prices weighed on sentiment.
An unabated sell-off in domestic equities also impacted trading pattern in the forex market.
The rupee opened sharply lower at 69.10 but pared most of the the losses during the day and finally settled at 68.98 against the American currency, lower by 4 paise over its previous close at the interbank foreign exchange market.The domestic currency had settled at 68.94 against the US dollar on Tuesday.
"The rupee opened on a weak note and settled 4 paise down against the US dollar amid sustained foreign fund outflows and rising crude oil prices.
Lower domestic equities and mixed Asian currencies against US dollar weighed on rupee," said V K Sharma, Head-PCG & Capital Market Strategy, HDFC securities.
Forex traders said the rupee is expected to trade in a narrow range ahead of the much crucial European Central Bank (ECB) policy statement to be released on Thursday.
Other major global cues that are going to dictate terms to the rupee include the US second quarter preliminary GDP print on Friday and the Federal Open Market Committee (FOMC) meeting on July 31, traders said.
Brent crude futures, the global oil benchmark, rose 0.25 per cent to USD 63.99 per barrel.
Foreign investors remained net sellers in the capital markets, offloading shares worth Rs 2,607.97 crore on Tuesday, provisional exchange data showed.
"So far this month, foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out USD 1.48 billion," Sharma said.The 10-year government bond yield was at 6.43 per cent on Wednesday.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08 per cent lower at 97.62.
Meanwhile, equity benchmark indices suffered losses for a fifth session in a row on Wednesday. The 30-share BSE Sensex tumbled 135.09 points or 0.36 per cent to close at an over two-month low of 37,847.65. Similarly, the broader NSE Nifty dropped 59.75 points or 0.53 per cent to 11,271.30.
Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 68.9922 and for rupee/euro at 77.2055. The reference rate for rupee/British pound was fixed at 85.9312 and for rupee/100 Japanese yen at 63.80.Meanwhile, the IMF on Tuesday cut its growth forecast for India for this year and the next saying its GDP will now grow respectively at the rate of 7 per cent in 2019, and 7.2 per cent in 2010, reflecting a weaker-than expected outlook for domestic demand.