Forex traders said ongoing RBI dollar sales and strong foreign-currency inflows under special schemes helped keep the rupee range-bound despite heavy external pressures.
At the interbank foreign exchange market, the rupee opened at 94.49 against the US dollar before touching 94.66, marking a fall of 10 paise from its previous close.
On Monday, the rupee had declined 13 paise to close at 94.56 against the American currency.
"The RBI's intervention has been particularly important in preventing higher oil prices from translating into a weaker rupee," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
According to Bhansali, the rupee is expected to remain in a range of 94.00 to 94.75 as crude oil remains near the USD 97 level, while the dollar index fell to 98.74 and the RBI continues to sell USD, keeping the rupee within the range.
The market is awaiting US and India CPI data as well as the FOMC meeting on September 16 for further cues, he said.
Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, was trading at 98.80, lower by 0.37 per cent.
Brent crude, the global oil benchmark, was trading 0.63 per cent higher at USD 97.61 per barrel in futures trade amid escalating US-Iran tensions and fears of disruption to oil flows through the Strait of Hormuz.
On the domestic equities market front, the Sensex dropped 382.25 points to 75,750.56 in early trade, while the Nifty declined 97.80 points to 23,681.80.
Foreign institutional investors (FIIs) purchased equities worth Rs 280.13 crore on a net basis on Monday, according to exchange data.
With crude prices remaining elevated and geopolitical tensions weighing on market sentiment, RBI intervention and foreign-currency inflows remain key factors keeping the rupee within its current trading range.
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