Mumbai: Extending losses for the second straight day, the rupee dropped further by 5 paise to settle at 66.86 per dollar Tuesday on persistent dollar demand from importers amid fall in equity market.
Sustained foreign capital outflows also affected the market sentiment. Foreign investors withdrew USD 156.58 millions from the equity market yesterday.
Fall in crude oil prices in global market strengthening the dollar overseas also weighed on the rupee sentiment, dealers said.
The crude oil prices tumbled to 12-year low levels of USD 31 a barrel today due to a global supply glut, a strong dollar and tepid demand.
The rupee resumed lower at 66.83 per dollar as against yesterday's closing level of 66.81 at the Interbank Foreign Exchange (Forex) market and dropped further to 66.9750 per dollar.
However, it recovered afterwards to 66.72 per dollar before concluding at 66.86 per dollar, showing a loss of five paise or 0.07 percent.
The rupee has lost 23 paise or 0.35 percent in two days. The domestic currency hovered in a range of 66.72 per dollar and 66.9750 per dollar during the day.
Meanwhile, the dollar index was up by 0.12 percent against a basket of 6 currencies in the later afternoon trade.
"Taking cues from domestic equity market USD closed stronger by 5 paise. USD traded in a narrow range maintaining 67 as cap. Trading range for the spot USD/INR pair is expected to be within 66.5 to 67 range and will take cue from domestic equity market," Veracity Group CEO Pramit Brahmbhatt said.
In forward market, premium for dollar eased further on sustained receivings by exporters.
The benchmark six-month premium payable in June moved down to 194-196 paise from 195-197 previously while, far forward December 2016 contract fell to 404.50-405.50 paise from 405-407 yesterday.
The RBI fixed the reference rate for the dollar at 66.8905 and for the euro at 72.7434.
In cross-currency trades, the rupee strengthened against the pound sterling to close at 96.49 from the Monday's level of 97.34 and recovered against the euro to end at 72.52 from 72.82.
The domestic unit eased against the Japanese yen to finish at 56.78 from 56.76 per 100 yen.