Mumbai, Oct 3 (PTI) The rupee witnessed range-bound trading in morning deals on Friday and depreciated 5 paise to 88.76 against the US dollar, as the strength of the American currency in the overseas market and a negative trend in domestic equities weighed on investor sentiments.

Forex traders said the USD/INR pair is trading in a narrow range as pressure from US policies, trade tensions and global uncertainties dented sentiments further.

Moreover, persistent foreign fund outflows and the ongoing US visa fee hike issue dragged down the domestic unit.

At the interbank foreign exchange market, the rupee opened at 88.68, then lost ground and touched 88.76 against the US dollar, registering a decline of 5 paise over its previous close.

On Wednesday, the rupee recovered 9 paise from its all-time closing low to settle at 88.71 against US dollar.

Equity, forex, bullion and commodity markets were closed on Thursday on account of Gandhi Jayanti and Dussehra.

"Exporters can also consider some options strategies to leave room for any volatility in the market. Capital outflows, high gold imports and global risk aversion have also contributed to rupee weakness and a challenging currency environment," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

Bhansali further said that markets continue to price in pressure from US policies, trade tensions and global uncertainties which have driven the Indian rupee to weakness in the last one year by more than 5 per cent.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 97.88.

Brent crude, the global oil benchmark, was trading 0.55 per cent higher at USD 64.46 per barrel in futures trade.

On the domestic equity market front, Sensex declined 299.17 points to 80,684.14 in opening trade, while the Nifty dropped 76.75 points to 24,759.55.

Foreign Institutional Investors offloaded equities worth Rs 1,605.20 crore on a net basis on Wednesday, according to exchange data.

Meanwhile, the RBI left its key interest rates unchanged on Wednesday, as it waited for greater clarity on the impact of US tariffs as well as playout of earlier rate cuts and recent tax reductions.

RBI Governor Sanjay Malhotra, however, signalled scope for easing in the coming months to support the economy from any possible hit from US tariffs. PTI DRR DRR

Currency depreciation pressures persist as rupee weakens amid capital outflows and trade tensions, monetary policy held with easing signalled. The rupee weakened in early trade as a stronger dollar, persistent foreign fund outflows, trade tensions and global risk aversion weighed on the currency; exporters were advised to use options strategies to manage volatility. Domestic authorities kept key interest rates unchanged but signalled potential future easing to mitigate external tariff risks and support the economy, while indicators such as a firmer dollar index, higher crude futures and foreign equity sell-offs reinforced exchange rate pressure.