MUMBAI: The rupee depreciated 28 paise to 95.64 against the US dollar in early trade on Wednesday, after the US Trade Representative proposed 12.5 per cent additional duties on India and 53 other countries over forced labour import violations.
Forex traders said the US Trade Representative's action, amid fresh hostilities and stalled talks between the US and Iran, weighed on investor sentiment.
At the interbank foreign exchange market, the rupee opened at 95.43 against the US dollar, then touched 95.64 in early trade, down 28 paise from its previous close.
On Tuesday, the rupee depreciated 17 paise to close at 95.36 against the US dollar.
The US Trade Representative has proposed imposing 12.5 per cent additional duties on 54 countries, including India, for failing to prohibit the import of goods produced with forced labour.
The action follows investigations launched against 60 countries over what the USTR described as their failure to impose and effectively enforce bans on imports made with forced labour.
India has denied the allegations under the forced labour clause and asked the US to end the investigations, saying such matters should be addressed within the framework of ongoing bilateral trade negotiations.
The USTR statement said 54 countries, including India, China, Japan, Brazil, Australia, the UK, and Saudi Arabia, have failed to impose and effectively enforce a prohibition on the importation of goods produced with forced labour.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.24, up 0.03 per cent, as safe-haven buying syndrome returned but kept the index well within a small range of 99 to 99.25.
Brent crude, the global oil benchmark, was trading higher by 0.82 per cent at USD 96.79 per barrel in futures trade.
On the domestic equity market front, Sensex tanked 699.74 points to 73,959.48 in early trade, while the Nifty dropped 177.40 points to 23,302.50.
Investors are also monitoring developments in West Asia and awaiting key economic data from the US, which could set the path for fresh clues from the US Federal Reserve on interest rate path, said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
Bhansali further added that market participants are now turning their attention to the RBI MPC rate decision on June 5, as inflation, growth and the rupee are under focus.
Foreign institutional investors offloaded equities worth Rs 8,362.92 crore on a net basis on Tuesday, according to exchange data.