Mumbai, Jul 29 (PTI) The rupee declined to over four-month low level and closed 21 paise weaker at 86.91 against the US dollar on Tuesday, weighed down by a jump in the American currency index and a surge in crude oil prices.

Forex traders said month-end dollar demand from Oil Marketing Companies (OMCs) and importers further pressurised the rupee.

Moreover, investors remained on the sidelines ahead of the US Federal Reserve and Bank of Japan's monetary policy decision this week.

At the interbank foreign exchange, the domestic unit opened at 86.76 and touched an intra-day low of 86.92 against the greenback, surpassing the closing level of March 17 when the unit had ended at 86.81 versus dollar.

At the end of Tuesday's trading session, the local unit settled at 86.91, down 21 paise over its previous closing price.

On Monday, the rupee had settled at 86.70 against the dollar.

"The Indian rupee fell by nearly 20 paise on a jump in the US dollar index and a surge in crude oil prices. The US dollar rallied on optimism over the US-EU trade deal. However, a bounce back in the domestic equities after falling sharply over the past three sessions cushioned the downside," said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.

Forex traders said investors traded cautiously awaiting the outcome of India-US trade talks ahead of the August 1 deadline.

"The lingering trade deal between India and the US may continue to weigh on the rupee. Rising crude oil prices and foreign outflows may also pressurise the rupee. FIIs have offloaded stocks worth nearly Rs 37,000 crore till date, the biggest selling since February 2025," Choudhary added.

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.

"Month-end dollar demand from OMCs and importers may further pressurise the rupee," Choudhary said, adding, "investors may remain cautious ahead of the US Federal Reserve and Bank of Japan’s monetary policy decision this week." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose marginally by 0.13 per cent to 98.75.

Brent crude, the global oil benchmark, went up by 0.46 per cent to USD 70.36 per barrel in futures trade, as developing trade agreements eased tariff concerns and boosted future energy demands.

In the domestic equity market, the 30-share BSE Sensex advanced 446.93 points, or 0.55 per cent, to close at 81,337.95, while the Nifty rose 140.20 points, or 0.57 per cent, to settle at 24,821.10.

Foreign institutional investors (FIIs) offloaded equities worth Rs 4,636.60 crore on a net basis on Tuesday, according to exchange data.

Dilip Parmar, Research Analyst, HDFC Securities, said the rupee's depreciation was primarily driven by sustained selling by foreign funds, coupled with a recovery in the US dollar and an increase in crude oil prices.

"Market participants are now closely monitoring the upcoming FOMC monetary policy meeting and the deadline for tariff negotiations, as these events are expected to provide further direction for the rupee. For the USD/INR pair, the immediate support level is seen at 86.30, while resistance is seen at 87.05," Parmar said. PTI DRR HVA

Rupee depreciation driven by stronger dollar, rising crude and month end dollar demand, keeping markets cautious. The Indian rupee weakened to a four month low as a firmer US dollar index, rising crude oil prices, month end dollar demand from oil marketing companies and importers, and sustained foreign institutional selling combined to pressurise the currency; ongoing trade negotiation uncertainty and impending central bank decisions were identified as key near term determinants of exchange rate direction.