Mumbai, Oct 1 (PTI) The rupee recovered 5 paise to 88.75 against US dollar in early trade on Wednesday, ahead of the Reserve Bank of India's monetary policy decision.

Forex traders said the Indian rupee traded in a narrow range after it closed at its lowest on Tuesday, driven primarily by persistent foreign fund outflows and mounting trade concerns.

Moreover, investors are also awaiting the Monetary Policy Committee decision of the Reserve Bank of India (RBI) for further cues.

At the interbank foreign exchange, the rupee opened at 88.79 against the US dollar before inching up to 88.75, higher by 5 paise from its previous close.

On Tuesday, the rupee fell 5 paise to an all-time low of 88.80 against the US dollar.

US President Donald Trump's constant pressure over India's Russian oil purchases have dampened the rupee sentiment and affected the overall equity market sentiment, thus keeping India into a worst performing market in terms of rupee and equities, said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

The RBI's support on rupee has been limited but the broader trend for the USD/INR pair remains negative amid strong dollar demand and cautious outlooks on India macroeconomic factors, Bhansali added.

The Reserve Bank's Monetary Policy Committee began its three-day deliberations on September 29, amid expectations of status quo on the key interest rate.

The meeting is taking place against the backdrop of ongoing geopolitical tensions and the US imposing 50 per cent tariffs on Indian shipments.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 97.84, higher by 0.07 per cent.

Brent crude, the global oil benchmark, was trading 0.15 per cent higher at USD 66.13 per barrel in futures trade.

On the domestic equity market front, the Sensex advanced 142.63 points to 80,410.25 in early trade, while the Nifty was up 50.75 points to 24,661.85.

Foreign Institutional Investors offloaded equities worth Rs 2,327.09 crore on Tuesday, according to exchange data.

Meanwhile, the Centre's fiscal deficit stood at 38.1 per cent of the full-year target at the end of August, according to data released by the Controller General of Accounts (CGA) on Tuesday.

The fiscal deficit was 27 per cent of the Budget Estimates (BE) of 2024-25 in the first five months of the previous financial year. PTI DRR DRR

Monetary policy decision influences rupee recovery amid persistent foreign fund outflows and trade tensions ahead of policy meeting. The rupee recovered modestly against the US dollar ahead of a central bank policy meeting, driven by persistent foreign fund outflows, trade-related pressures and strong dollar demand; limited central bank support and elevated fiscal deficit metrics have heightened market caution.