Mumbai, March 25 The rupee fell 18 paise to 93.94 against the US dollar in early trading on Wednesday as sustained foreign fund outflows kept investors on edge.
However, a drop in global crude oil prices, a weaker dollar, and a strong opening in the domestic equity markets prevented sharper losses in the local unit, forex traders said.
Foreign fund outflows amid uncertainties over the West Asia crisis further weighed on the local unit, forex traders said.
At the interbank foreign exchange, the local unit opened at 93.94 against the US dollar, down 18 paise from its previous close, and maintained that level.
The rupee dropped 23 paise to close at 93.76 against the US dollar on Tuesday.
"The dollar buying trend will continue unless the RBI sells the dollar because there is hardly any supply of dollars coming forward from other sources. Exporters at the current level of 93.90 may hedge for up to one month while importers may buy all dips they get," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
Expectations of the rupee rising to 92.80 are currently rife among market participants, with expectations of the RBI stepping in ahead of the end of the ongoing financial year, he said.
The dollar index, which gauges the strength of the dollar against a basket of six currencies, was trading 0.15 per cent lower at 99.28.
Brent crude, the global oil benchmark, was trading 4.4 per cent lower at USD 99.89 per barrel in futures trade.
On the domestic equity market front, the Sensex rose sharply by 1,161.61 points, or 1.57 per cent, to 75,230.06, while the Nifty was up 372.85 points, or 1.63 per cent, to 23,285.25.
Foreign institutional investors sold equities worth Rs 8,009.56 crore on a net basis on Tuesday, according to exchange data.