Mumbai, Jul 22 (PTI) The rupee pared initial gains and settled for the day down 7 paise at 86.38 against the US dollar on Tuesday, amid uncertainty over the US-India trade deal ahead of the August 1 deadline.

Forex traders said, all eyes are now on the outcome of India-US trade talks, especially as the August 1 deadline for potential tariffs on Indian exports draws near.

The weakness in the American currency and softening of crude oil prices supported the rupee at lower levels, while foreign fund outflows and a negative trend in domestic equities weighed on the local unit and restricted the upside.

At the interbank foreign exchange, the domestic unit opened at 86.26 against the greenback and touched an intra-day high of 86.22 and a low of 86.41 against the greenback.

At the end of Tuesday's trading session, the local unit settled at 86.38, down 7 paise over its previous closing price. This was rupee's fifth straight session of decline since July 16 when the unit had lost 16 paise and ended at 85.92 against the dollar.

On Monday, the rupee depreciated 15 paise to close at 86.31 against the US dollar.

"We expect the rupee to trade with a slight negative bias on trade deal talks. However, weakness in the American currency and softening of crude oil prices may support the rupee at lower levels," Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said.

Dilip Parmar, Research Analyst, HDFC Securities said the rupee depreciated for the fifth consecutive day, driven by risk-averse market sentiment and consistent dollar demand.

"Regional currencies remain range-bound as the dollar consolidates amid geopolitical uncertainties. Near-term, spot USD-INR has support at 85.95 and resistance at 86.70," he added.

Meanwhile, the US team will visit India in August for the next round of negotiations for the proposed bilateral trade agreement between the two countries, an official said on Monday.

India and the US teams concluded the fifth round of talks for the agreement last week in Washington.

These deliberations are important as both sides are looking at finalising an interim trade deal before August 1, which marks the end of the suspension period of Trump tariffs imposed on dozens of countries, including India (26 per cent).

If the discussions fail or get delayed, Indian exporters could face fresh pressure -- adding to the rupee's challenges. However, if a deal is reached, it could offer a much-needed breather. Until then, the uncertainty is likely to keep market participants cautious.

"Traders may remain cautious ahead of PMI and durable goods orders data from the US this week," Choudhary said, adding that USD-INR spot price is expected to trade in a range of 86.10 to 86.65.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.03 per cent to 97.82.

Brent crude, the global oil benchmark, fell 0.94 per cent to USD 68.56 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex declined 13.53 points, or 0.02 per cent, to close at 82,186.81, while the Nifty fell 29.80 points, or 0.12 per cent, to settle at 25,060.90.

Foreign institutional investors (FIIs) offloaded equities worth Rs 3,548.92 crore on a net basis on Tuesday, according to exchange data. PTI DRR HVA

Trade deal uncertainty may prolong currency pressure as tariff suspension talks shape export and market risk. Uncertainty over a prospective bilateral trade agreement and the approaching end of the interim tariff suspension period exerted downward pressure on the rupee. The negotiation outcome is the principal contingent factor: failure or delay to secure an interim deal before the suspension ends would reintroduce tariff risk for exporters and likely amplify currency stress. Market drivers included foreign fund outflows and equity weakness, while weaker dollar and softer crude prices provided limited support.