The rupee depreciated by 16 paise to close at 73.40 (provisional) against the US dollar on Monday, tracking a rebound in the American currency overseas.
At the interbank forex market, the domestic unit opened at 73.47 against the US dollar and witnessed an intra-day high of 73.37 and a low of 73.50.
The local unit finally settled at 73.40, registering a fall of 16 paise over its previous close.
On Friday, the rupee had finished at 73.24 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.41 per cent to 90.46.
"Indian Rupee depreciated on the back of strong dollar. The dollar is gaining strength amid rise in bond yields. Bond yields and real rates are rising on expectation of more fiscal stimulus from the Democrat controlled government and reoccurrence of long-muted inflation," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
US President-elect Joe Biden has pledged huge fiscal support to counter the impact of the pandemic.
Furthermore, investors remained cautious ahead of India's CPI and IIP data.
However, sharp fall was prevented on the back of a rise in domestic markets and steady FII inflows. Rupee may trade in the range of 73.10 to 73.90 in next couple of sessions, Mukadam noted.
On the domestic equity market front, the BSE Sensex ended 486.81 points or 1 per cent higher at 49,269.32, while the broader NSE Nifty advanced 137.50 points or 0.96 per cent to 14,484.75.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 6,029.83 crore on Friday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 1.57 per cent to USD 55.11 per barrel.