Mumbai, Jun 3 (PTI) The rupee depreciated 40 paise to close at 95.76 against the US dollar on Wednesday, after the US Trade Representative proposed a 12.5 per cent additional duties on Indian imports, citing labour violations.

Forex traders said strong dollar demand, surging crude oil prices, geopolitical tensions, and relentless foreign capital outflows dented investor sentiment further.

At the interbank foreign exchange market, the rupee opened at 95.43 against the US dollar, then touched an intraday low of 95.80 and finally ended the session at 95.76, down 40 paise from its previous close.

On Tuesday, the rupee depreciated 17 paise to close at 95.36 against the US dollar.

Forex traders said the US Trade Representative's action, amid fresh hostilities and stalled talks between the US and Iran, weighed on investor sentiment.

The US Trade Representative has proposed 12.5 per cent additional duties on 54 countries, including India, for failing to prohibit the import of goods produced with forced labour.

"The rupee fell for a second consecutive session, weighed down by capital outflows and mounting concerns over US President Donald Trump's latest tariff proposals. Escalating tensions in the Middle East also pushed crude oil prices higher, further denting investor sentiment. Additionally, a stronger US dollar and rising bond yields continued to pressure regional currencies on expectations of hawkish central banks," Dilip Parmar, Research Analyst, HDFC Securities, said.

Meanwhile, the government said India is engaged with the US on the Section 301 investigations over concerns related to forced labour and excess industrial capacity.

The country is also "parallelly" engaged with the US for finalisation of an interim trade agreement, a framework for which was announced through a joint statement on February 7.

The Office of the United States Trade Representative (USTR) launched two separate Section 301 investigations on March 11 and 12, 2026, covering 60 economies over concerns related to forced labour and excess industrial capacity.

Meanwhile, market participants are now turning their attention to the RBI MPC rate decision on June 5, as inflation, growth and the rupee are under focus.

The RBI Monetary Policy Committee meeting is scheduled for June 3-5. The six-member MPC, headed by RBI Governor Sanjay Malhotra, will announce its decision on June 5.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.34, up 0.13 per cent.

Brent crude, the global oil benchmark, was trading higher by 2.76 per cent at USD 98.65 per barrel in futures trade.

On the domestic equity market front, Sensex dropped 303.67 points to settle at 74,346.17, while the Nifty was down 77.95 points to 23,405.60.

Foreign institutional investors offloaded equities worth Rs 5,616.56 crore on a net basis on Wednesday, according to exchange data. PTI DRR TRB