The rupee depreciated 16 paise to 73.77 against the US dollar in opening trade on Monday as muted domestic equities and strong American currency weighed on investor sentiment.
The local unit opened at 73.77 at the interbank forex market, down 16 paise over its last close.
On Friday, the rupee had settled at 73.61 against the greenback.
“Governments across Europe have imposed stricter measures to contain the virus as cases have surged to record highs on account of the second wave. We could see the risk sentiment sour on account of this development,” said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further added that market participants would look to adjust their positioning across asset classes ahead of the US elections next week.
“We could see some risk on bets being rolled back. The overall mood is likely to be that of caution. Markets would also become less hopeful of a pre-election agreement on fiscal stimulus between the Democrats and the White House,” he said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.16 per cent to 92.91.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 80.91 points lower at 40,604.59 and the broader NSE Nifty fell 27.65 points to 11,902.70.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 906.93 crore on a net basis on Friday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 1.72 per cent to USD 41.05 per barrel.