Mumbai, Sep 29 (PTI) Rupee rises 3 paise to 88.69 against the US dollar in early trade on Monday, tracking positive Asian currencies and weakness of the American currency in the overseas market.

Forex traders said the rupee is trading in a tight range as it remains under pressure influenced by continued capital outflows and geo-political developments.

Moreover, the RBI policy meeting outcome on October 1, is expected to influence the rupee and government bond movements.

At the interbank foreign exchange market the rupee opened at 88.69 against the US dollar, registering a gain of 3 paise from its previous close. On Friday, the rupee rebounded from its all-time low to close 4 paise higher at 88.72 against the US dollar.

The rupee fell to a fresh lifetime low of 88.76 against the American currency on Thursday.

"The RBI may intervene to keep rupee within the 88.80 level as market watchers closely monitor the impact of US tariffs and external capital flows on the currency," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 97.94, lower by 0.21 per cent. Brent crude, the global oil benchmark, was trading 0.58 per cent lower at USD 69.72 per barrel in futures trade.

Forex traders said persistent foreign fund outflows and risk-off sentiment prevented a sharp rise in the domestic unit, while hopes of a breakthrough on the US tariff front weighed on investor sentiments.

On the domestic equity market front, equity markets rebounded in early trade with Sensex climbing 255.46 points to 80,681.92 and Nifty rising 89.05 points to 24,743.75.

Foreign Institutional Investors offloaded equities worth Rs 5,687.58 crore on Friday, according to exchange data.

Meanwhile, the US has announced the imposition of a 100 per cent tariff on branded or patented drugs entering the US from October 1, except for pharmaceutical companies building manufacturing plants in the US.

The exemption covers projects where construction has started, including sites that have broken ground or are under construction.

India's forex reserves dropped by USD 396 million to USD 702.57 billion for the week ended September 19, according to the RBI data.

In the previous reporting week, the overall reserves had jumped by USD 4.698 billion to USD 702.966 billion. PTI DRR DR DR

Currency intervention may be used to stabilise the rupee amid capital outflows and trade-policy shocks. Rupee weakness is attributed to sustained foreign fund outflows, risk-off sentiment and trade-policy shocks, with the Reserve Bank's upcoming policy meeting and the prospect of currency intervention expected to influence exchange-rate and bond-market dynamics; forex reserves movements, equity outflows and international commodity prices are noted as interacting indicators informing market expectations and potential central bank action.