The rupee depreciated 3 paise to close at 83.96 (provisional) against the American currency on Wednesday, amidst strong dollar demand from importers particularly oil companies.

Forex traders said a positive trend in domestic equities, foreign fund inflows and overnight decline in crude oil prices cushioned the downside.

At the interbank foreign exchange market, the local unit opened at 83.94 and touched an intra-day low of 83.97 against the US dollar.

The domestic currency finally settled at 83.96 (provisional), 3 paise lower from its previous close.

On Tuesday, the rupee depreciated by 6 paise to close at 83.93 against the American currency.

"We expect the rupee to trade with a slight negative bias on recovery in the US dollar and month-end dollar demand from oil marketing companies (OMCs) and importers," said Anuj Choudhary -- Research Analyst at Sharekhan by BNP Paribas.

Choudhary further noted that rise in global risk sentiments amid dovish Fed speak and rising expectations of a rate cut by the US Fed in September may support the rupee.

"Traders may remain cautious ahead of US GDP and core personal consumption expenditures (PCE) data from the US this week.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.36 per cent higher at 100.91.

Brent crude, the global oil benchmark, declined 0.93 per cent to USD 78.81 per barrel.

On the domestic equity market front, Sensex rose 73.80 points, or 0.09 per cent, to close at 81,785.56 points. The Nifty closed 34.60 points, or 0.14 per cent, up at 25,052.35 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Tuesday, as they purchased shares worth Rs 1,503.76 crore, according to exchange data.

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