The rupee weakened by 4 paise to end at 74.23 (provisional) against the US dollar on Tuesday as weaker domestic equities and stronger dollar index weighed on forex market sentiment.
At the interbank foreign exchange market, the rupee opened at 74.26 per dollar as against its previous close of 74.19. It hovered in the range of 74.20 to 74.28 during the day, before ending at 74.23 against the greenback.
"Rupee depreciated amid weaker domestic equities and stronger dollar index as the Asian regional currencies once again face cases of a new variant of coronavirus and probable strict restrictions at the state level," Dilip Parmar, Research Analyst, HDFC Securities said.
Expectations of higher-than-expected fiscal deficit after governments' announcement of a new relief package on Monday weighed on investor sentiment.
"The near-term momentum remains sideways with spot USDINR expected to remain in a tight range of 74 to 74.50," Parmar added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.10 per cent to 91.97.
On the domestic equity market front, the BSE Sensex ended 185.93 points or 0.35 per cent lower at 52,549.66, while the broader NSE Nifty fell 66.25 points or 0.42 per cent to 15,748.45.
Brent crude futures, the global oil benchmark, declined 0.24 per cent to $74.50 per barrel.
Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 1,658.72 crore, as per exchange data.