The Indian rupee depreciated by 3 paise to close at a provisional 95.40 against the US dollar on Tuesday, pressured by elevated crude oil prices and weakness in domestic equity markets.

Crude oil, India's largest import by value, exerts significant influence on the rupee's exchange rate. India imports more than 80% of its crude oil requirements, making the currency particularly sensitive to global oil price movements. Higher global oil prices widen India's current account deficit and increase dollar demand from oil-importing companies, typically weighing on the currency.

Domestic equities also play a role in rupee valuation, as foreign institutional investor activity in Indian stock markets affects capital flows and, in turn, currency demand. The Reserve Bank of India monitors foreign exchange markets and periodically intervenes to curb excessive volatility, though it does not target a specific exchange rate level for the rupee.

The rupee is one of Asia's most actively traded emerging market currencies. Its value against the dollar is influenced by factors including trade balances, foreign investment flows, interest rate differentials between the Reserve Bank of India and the US Federal Reserve, and global risk sentiment.

Source: CNBC-TV18