The rupee declined 5 paise to close at 74.74 (provisional) against the US dollar on Tuesday, tracking the strength of the American currency in the overseas market and elevated crude oil prices.

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At the interbank foreign exchange, the rupee opened at 74.65 against the American dollar, and later witnessed an intra-day high of 74.57 and a low of 74.80 against the greenback.

The local unit finally ended the day at 74.74, down 5 paise from the previous close.

In the previous session on Friday, the rupee had settled at 74.69 against the greenback.

The forex market was closed on Monday.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.25 per cent higher at 95.63.

"The rupee depreciated against the dollar on importer covering and broad-based strength in dollar index. Dollar index gained after US yields soared amid prospects of faster policy normalisation by the Federal Reserve," said Dilip Parmar, Research Analyst, HDFC Securities.

"There have been multiple factors like foreign fund outflows, higher crude oil prices, higher government borrowings and elevated inflation which are already adding pressure on the rupee. While there are few positive factors like higher forex reserves, better growth prospectus of the economy and expectation of good inflows in LIC IPO," Parmar said.

Forex market traders are re-assessing fundamentals ahead of the RBI monetary policy decisions for clear direction.
"We believe USDINR is likely to consolidate in the range of 74.50 to 75.50 ahead of the RBI policy decision," Parmar added.

On the domestic equity market front, the 30-share Sensex ended 187.39 points or 0.33 per cent higher at 57,808.58, while the broader NSE Nifty settled up 53.15 points or 0.31 per cent at 17,266.75.

Global oil benchmark Brent crude futures fell 0.47 per cent to USD 92.95 per barrel.

Foreign institutional investors were net sellers in the capital market on Monday, as they offloaded shares worth Rs 1,157.23 crore, as per stock exchange data.