Mumbai, Dec 24 (PTI) The rupee pared initial gains and settled for the day lower by 16 paise at 89.79 (provisional) against the US dollar on Wednesday, fuelled by persistent capital withdrawals from foreign investors, alongside heightened greenback demand from bullion importers.

Forex traders said that despite the central bank's announcement of USDINR swaps and Open Market Operations (OMO), the measures failed to boost market sentiments, amid strong dollar demand and rising crude oil prices.

At the interbank foreign exchange, the rupee opened at 89.56 against the US dollar, then touched an intra-day high of 89.51, registering a 12-paise gain from its previous close.

At the end of the trading session on Wednesday, the rupee pared its initial gains and was quoted at 89.79 (provisional), down 16 paise from its previous close.

On Tuesday, the rupee settled at 89.63 against the US dollar.

The decline in the USD/INR pair was driven by a shift toward risk aversion, fuelled by persistent capital withdrawals from foreign investors leading up to the holiday break, alongside heightened greenback demand from bullion importers, said Dilip Parmar, Senior Research Analyst, HDFC Securities.

"Despite the central bank's announcement of USDINR swaps and Open Market Operations (OMO), the measures failed to ignite market enthusiasm as they did little to bridge the widening gap between dollar supply and demand ahead of year-end," Parmar noted.

The outlook for spot USDINR maintains an upward trajectory provided it holds above the 89.00 mark; however, the 90.30-level continues to act as a formidable resistance for further gains, he added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.13 per cent lower at 97.81.

Brent crude, the global oil benchmark, was trading 0.22 per cent higher at USD 62.52 per barrel in futures trade.

On the domestic equity market front, the Sensex declined 116.14 points to settle at 85,408.70, while the Nifty dropped 35.05 points to 26,142.10.

Foreign Institutional Investors offloaded equities worth Rs 1,794.80 crore on Tuesday, according to exchange data.

The Reserve Bank of India on Tuesday said it will purchase government securities worth Rs 2 lakh crore and conduct a USD 10 billion buy/sell dollar-rupee swap auction to inject liquidity in the banking system.

The latest announcement comes days after the RBI conducted Rs 1 lakh crore OMO purchase auctions of Government of India securities and USD/INR Buy/Sell Swap auction of USD 5 billion for a tenor of three years. PTI DRR TRB TRB

Rupee weakens amid foreign outflows and bullion demand despite announced USD/INR swaps and OMO liquidity injections. The rupee settled weaker at 89.79 against the US dollar as foreign investor withdrawals and bullion importers' dollar demand increased; announced USD/INR swap auctions and Open Market Operations to inject liquidity did not substantially bridge the dollar supply-demand gap, with analysts noting support near 89.00 and resistance around 90.30.