The rupee pared initial losses and settled on a flat note with a gain of just 2 paise at 87.30 (provisional) against the US dollar on Tuesday, as a weak US Dollar index and a sharp fall in crude oil prices prevented the slide in the domestic unit.

Forex traders said the Indian rupee traded flat with a negative bias on a weak tone in the domestic markets. Foreign Institutional Investors (FIIs) continued to remain net sellers, which also weighed on the rupee.

However, weakness of the American currency in the overseas market and lower crude oil prices supported the unit.

At the interbank foreign exchange, the rupee witnessed high volatility. It opened at 87.38 then touched the intraday high of 87.27 and the low of 84.40 against the greenback. The unit ended the session at 87.30 (provisional) against the dollar, registering a gain of 2 paise from its previous closing level.

On Monday, the rupee settled with a gain of 5 paise at 87.32 against the US dollar.

“We expect the rupee to trade with negative bias on account of weakness in the domestic markets and continued FII outflows. Uncertainty over the trade tariff issue may further pressurise the rupee.

“However, weak crude oil prices and weak tone in the US Dollar may support the rupee at lower levels. USD-INR spot price is expected to trade in a range of 87.10 to 87.60,” said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.40 per cent lower at 106.31.

“The US dollar fell on the ongoing trade tariff concerns and disappointing economic data from the US. ISM manufacturing PMI data fell to 50.3 in February vs 50.6 in January and forecast a rise to 50.9,” Choudhary said.

Brent crude, the global oil benchmark, fell 1.49 per cent to $70.55 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex fell 96.01 points, or 0.13 per cent, to settle at 72,989.93, while the Nifty slipped 36.65 points, or 0.17 per cent, to close at 22,082.65 points.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹4,788.29 crore in the capital markets on a net basis on Monday, according to exchange data.

On the global front, President Donald Trump said on Monday that 25 per cent taxes on imports from Mexico and Canada would start on Tuesday.

Trump said that the tariffs are to force Mexico and Canada to step up their fight against fentanyl trafficking and stop illegal immigration. He wants to eliminate the US’ trade imbalances and push more factories to relocate in the United States.