The Indian rupee depreciated 3 paise to settle at 83.23 against the US dollar on Wednesday, as weak domestic equities and sustained foreign fund outflows weighed on investor sentiment.

The rupee traded in a narrow range of 83.27 to 83.19 during the day, before closing at 83.23.

Analysts attributed the rupee”s decline to a combination of factors, including a muted trend in domestic equities, sustained foreign fund outflows, and the strength of the American currency in the overseas market.

“The Indian rupee declined on weak domestic markets and further selling by FIIs. However, softening of US dollar cushioned the downside,” said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.

FIIs were net sellers in the capital markets on Tuesday, offloading shares worth Rs 2,034.14 crore.

The rupee”s decline comes ahead of the Reserve Bank of India”s (RBI) monetary policy decision later this week. The RBI is expected to raise interest rates again in an effort to tame inflation.

The US dollar index, which gauges the greenback”s strength against a basket of six currencies, fell by 0.21 per cent to 106.77 on Wednesday.

Brent crude futures, the global oil benchmark, declined 0.95 per cent to USD 90.06 per barrel.

On the domestic equity market front, the 30-share BSE Sensex closed 286.06 points or 0.44 per cent lower at 65,226.04. The broader NSE Nifty declined 92.65 points or 0.47 per cent to 19,436.10.