MUMBAI: The rupee depreciated 21 paise to 94.95 against US dollar in early trade on Wednesday weighed down by surging crude oil prices, which inched closer to the USD 100-a-barrel mark amid the simmering US-Iran tensions.
A weak dollar, however, cushioned the fall, forex traders said.
At the interbank foreign exchange market, the rupee opened at 94.80 against the US dollar, then touched 94.95, registering a fall of 21 paise from its previous close.
On Tuesday, the rupee fell 18 paise to close at 94.74 against the American currency.
"Indian rupee opened lower on escalating geopolitical tensions and surge in crude oil prices. Brent has neared the USD 100 mark as US and Iran attack each other," said Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan.
The local currency is expected to trade with a negative bias on rising crude oil prices and escalating geopolitical tensions, he said.
"Weak global markets may further pressurise the rupee. However, a weak dollar may support the rupee at lower levels. Investors now focus on inflation data from the US and India. USDINR spot price is expected to trade in a range of Rs 94.70 to Rs 95.15," he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.76, lower by 0.03 per cent.
Brent crude, the global oil benchmark, was trading higher by 1.41 per cent at USD 99.30 per barrel in futures trade, amid escalating US-Iran tensions and fears of disruption to oil flows through the Strait of Hormuz.
On the domestic equities market front, Sensex tanked 500.25 points to 75,060.61 in early trade while Nifty declined 129.40 points to 23,506.10.
Foreign institutional investors (FIIs) sold equities worth Rs 123.19 crore on a net basis on Tuesday, according to exchange data.