Mumbai: The rupee depreciated by 26 paise to 70.75 against the US dollar in early trade Wednesday at the interbank foreign exchange, amid strengthening of the US dollar and foreign fund outflows. Forex dealers said fresh demand for the American currency from importers weighed on the domestic unit. Besides, investors were treading the cautious path ahead of the RBI policy decision.

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The rupee opened lower at 70.70 a dollar and dropped further to quote at 70.75, 26 paise down over its previous close. On Tuesday, the rupee slipped 3 paise to close at 70.49 against the US dollar due to increased demand for the American currency from importers and firming global crude oil prices.

The rupee came under pressure following heavy selling in domestic equities amid foreign fund outflows. The BSE benchmark Sensex dropped over 200 points in early trade Wednesday. The 30-share index was trading 209.22 points, or 0.58 per cent, lower at 35,925.09. In similar movement, the NSE Nifty was trading 75.90 points, or 0.70 per cent, lower at 10,793.60.

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Foreign funds withdrew Rs 55 crore on a net basis from capital markets, provisional data showed. However, recovery in global crude oil prices restricted the fall in the domestic currency.

Brent crude, the international benchmark, again and was quoted at USD 60.87 per barrel Wednesday, lower by 1.95 per cent.