The rupee declined by 76 paise to close at 82.61 against the US dollar on Tuesday due to heavy selling pressure in domestic equities and rising crude prices in the overseas markets.
In addition, investors remained concerned over continued foreign capital outflows ahead of the RBI's policy announcement on Wednesday, forex dealers said.
At the interbank foreign exchange market, the local unit opened weak at 81.94, then slipped further to end at 82.61, registering a fall of 76 paise. During the day, the local unit witnessed an intraday high of 81.94 and a low of 82.63.
In the previous session on Monday, the rupee had settled down by 52 paise at 81.85 against the dollar.
The dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.05 per cent to 105.24.
Global oil benchmark Brent crude futures rose 0.64 per cent to USD 83.22 per barrel.
On the domestic equity market front, the 30-share BSE Sensex fell 208.24 points or 0.33 per cent to end at 62,626.36, while the broader NSE Nifty 58.30 declined points or 0.31 per cent to 18,642.75.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday as they sold shares worth Rs 1,139.07 crore, according to exchange data.
The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23, saying the economy was showing higher resilience to global shocks.
In its India Development Update, the World Bank said the revision was due to the higher resilience of the Indian economy to global shocks and better-than-expected second-quarter numbers.
The Reserve Bank's rate-setting panel on Monday started brainstorming for the next round of monetary policy amid expectations of a moderate interest rate hike of 25-35 basis points as inflation has started showing signs of easing and economic growth tapering.
The RBI has hiked key benchmark lending rate by 50 basis points (bps) thrice since June over and above an off-cycle 40 bps increase in the repo in May.
RBI Governor Shaktikanta Das would be announcing the bi-monthly monetary policy on Wednesday (December 7) at the conclusion of the three-day Monetary Policy Committee (MPC) meeting.
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