The Indian rupee, the domestic currency declined 17 paise to 73.73 per dollar on Monday's opening trade amid weak domestic equities and strengthening American currency in the overseas market. However, continued foreign fund inflows and lower crude prices supported the rupee and restricted the fall.
The local unit opened sharply lower at 73.74 against the greenback at the interbank forex market and was trading 17 paise down at 73.73 in early deals.
In the previous session, rupee settled 3 paise higher at 73.56 per US dollar on Friday's opening trade as the weakness of the American currency and optimism surrounding the US stimulus aid package supported the domestic unit. Sustained foreign fund inflows also strengthened investor sentiment.
Meanwhile, the dollar index, was trading up 0.46 per cent at 90.37 against a basket of six currencies.
On the domestic equity market front, after opening lower, equity indices traded flat with positive bias on Monday amid weak global equities. Sensex was trading 36 points lower at 46,930 and Nifty fell by 20 points to 13,739.
Foreign portfolio investors (FPIs) bought shares worth Rs 2,720.95 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 2,424.61 crore in the Indian equity market on 18 December 2020, provisional data showed.
Brent crude futures, the global oil benchmark, fell 3.02 per cent to USD 50.68 per barrel. Oil price gained on Friday as investors focused on covid vaccine release but is trading deep in red today as countries including U.K. plan emergency lockdown.
Commenting on Rupee's outlook, Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking said," Value erosion in dollar, excessive liquidity is driving foreign investors to bet big on Indian equities, which give the rupee a slight appreciating bias in the near term. However, 73.20-73.00 remains a strong hurdle for the rupee, and with RBI standing in the way, bouts of large-scale appreciation can be ruled out. We reckon that the RBI will prefer to keep the rupee exchange rate stable between the 73 to 74.50 band for quite some time now."