Mumbai, Nov 17 (PTI) The rupee declined 6 paise to 88.72 against the US dollar in early trade on Monday amid a firm American currency and relentless outflow of foreign capital.

Positive sentiment in domestic equity markets and lower crude oil prices overseas, however, prevented a sharp fall in the Indian currency, forex analysts said.

They said investors are also watching the progress on the proposed India-US trade deal as well as the domestic PMI data to be released later this week.

At the interbank foreign exchange market, the rupee opened at 88.70 and slipped further to trade at 88.72 against the greenback in initial deals, registering a loss of 6 paise from its previous closing level.

On Friday, the rupee settled 4 paise higher at 88.66 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.15 per cent higher at 99.35.

Brent crude, the global oil benchmark, was trading 0.85 per cent lower at USD 63.84 per barrel in futures trade.

On the domestic equity market front, Sensex climbed 212.98 points or 0.25 per cent to 84,775.76 in early trade, while the Nifty advanced 50.90 points or 0.20 per cent to 25,960.95.

Foreign institutional investors sold equities worth Rs 4,968.22 crore on Friday, according to exchange data.

The government data released on Friday showed the country's wholesale price inflation fell to a 27-month low of (-) 1.21 per cent in October, led by a sharp deflation in food items like pulses and vegetables, and lower prices of fuel and manufactured items.

Wholesale Price Index (WPI)-based inflation was 0.13 per cent in September and 2.75 per cent in October last year, the data showed.

Also, foreign exchange reserves dropped by another USD 2.699 billion to USD 687.034 billion during the week ended November 7, the RBI said on Friday.

The forex kitty has been on a declining trend for the past few weeks, and had decreased by USD 5.623 billion to USD 689.733 billion in the previous reporting week. PTI HVA DR DR

Exchange rate volatility: rupee pressured by dollar strength and capital outflows, amid falling reserves and easing WPI. Rupee depreciation reflected exchange rate volatility driven by a firmer US dollar and sustained foreign capital outflows, partially offset by domestic equity gains and lower crude prices; the currency move occurred alongside significant foreign institutional investor selling, declining foreign exchange reserves, and a marked easing in WPI-based inflation, with market attention on prospective trade developments and upcoming PMI data as near-term determinants of capital flows and exchange rate direction.