MUMBAI: Rupee traded in a narrow range and fell 3 paise to 95.97 against the US dollar in early trade on Wednesday, pressured by persistent dollar demand from state-run oil marketing companies and firm crude oil prices.
Dollar sales by state-run banks on behalf of the Reserve Bank of India in both spot and forward markets are restricting the USD/INR pair under 96.00 level.
Additionally, foreign portfolio outflows of around USD 2.2 billion this month and firm US yields are keeping the pressure on the USD/INR pair.
At the interbank foreign exchange market, the rupee opened at 95.87, then fell to 95.97 against the US dollar, registering a fall of 3 paise from its previous close.
On Tuesday, the rupee settled marginally higher at 95.94, just a tad over the psychologically important 96 per dollar level.
"The Reserve Bank has been an active presence -- dealers report state-run bank dollar sales, and the USD 14.9 billion fall in reserves to USD 766 billion in the latest week is consistent with sizeable intervention -- while portfolio outflows of around USD 2.2 billion this month and firm US yields keep the pressure on," Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 101.40, higher by 0.04 per cent.
Brent crude, the global oil benchmark, was trading higher by 0.82 per cent at USD 103.43 per barrel in futures trade.
On the domestic equity market front, Sensex rose 190 points to 72,733.04 in early trade, while the Nifty was up 22 points to 22,735.20.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 9,980.22 crore on a net basis on Tuesday, according to exchange data.