The rupee depreciated by 36 paise to close at a three-week low of 81.88 against the US dollar on Tuesday after the Economic Survey 2022-23 said the domestic unit may remain under pressure on account of plateauing of exports and subsequent widening of the current account deficit.

Forex traders said significant foreign fund outflows and a muted trend in domestic equities also dented investor sentiment ahead of the Union budget and Federal Reserve Policy announcement on February 1.

At the interbank foreign exchange, the domestic unit opened weak at 81.61 against the dollar and lost further ground to fall below the 82 level. The rupee finally ended at 81.88, registering a decline of 36 paise over its last close.

During the session, the local unit witnessed an intra-day high of 81.58 and a low of 82.07 against the US dollar. In the previous session on Monday, the rupee settled at 81.52 against the American currency.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.15 per cent to 102.43.

Brent crude futures, the global oil benchmark, declined 1.18 per cent to USD 83.90 per barrel.

Forex traders said investors are bracing for interest rate decisions from the Federal Reserve, and the Union Budget for 2023-24, both scheduled to be announced on Wednesday.

The Indian rupee may remain under depreciation pressure on account of plateauing of exports and subsequent widening of the current account deficit, the Economic Survey said.

The country's current account deficit (CAD) widened to 4.4 per cent of the GDP in the quarter that ended September from 2.2 per cent in April-June due to a higher trade gap, as per the latest data of the Reserve Bank of India.

According to the survey, while commodity prices have retreated from record highs, they are still above the "pre-conflict" (Russia-Ukraine war) levels.

Strong domestic demand amid high commodity prices will raise India's total import bill and contribute to unfavourable developments in the current account balance, it said.

"These may be exacerbated by plateauing export growth on account of slackening global demand. Should the current account deficit widen further, the currency may come under depreciation pressure," said the key document released a day before the presentation of the Union Budget 2023-24.

"The Indian rupee tumbled below 82 ahead of the Union budget and FOMC outcomes. The surge in the dollar index and short squeeze dragged the rupee to a three-week low," said Dilip Parmar, Research Analyst, HDFC Securities.

Spot USDINR has minor resistance at 82.10, the 50-day moving average and above that at 82.50 while on the downside 81.70 will act as support, Parmar noted.

According to Jateen Trivedi, VP Research Analyst at LKP Securities, the rupee traded weak against the dollar as foreign fund outflow kept pressure on rupee due to uncertainty over Adani group sell-off in the last few days.

The dollar index appreciation played its part on rupee weakness as the dollar was up at 102.33 compared to USD 101.30 low last week.

"Rupee will grab cues from India's Union Budget on February 1 with the government's focus on income and expenditure forecast for the coming year. Rupee can be seen in the range of 81.65-82.30," Trivedi said.

In the domestic equity market, the 30-share BSE Sensex was trading 49.49 points or 0.08 per cent higher at 59,549.90. The broader NSE Nifty advanced 13.20 points or 0.07 per cent to 17,662.15.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth Rs 5,439.64 crore, according to exchange data.

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