The rupee depreciated by 12 paise to close at 68.92 against the US dollar on Monday tracking heavy losses in the domestic equity market and a spike in crude oil prices following Iran's seizure of a British tanker.

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Forex traders said a stronger US dollar against major currencies overseas also weighed on the rupee sentiment.

Besides, market participants are not very hopeful about large-scale easing by the Reserve Bank, following RBI Governor Shaktikanta Das's statement, wherein he said a change in monetary policy stance effectively equates to an additional 25-bps rate cut, traders said.

At the interbank foreign exchange (forex) market, the domestic currency opened lower at 68.95 per dollar, and further lost ground to touch the day's low of 69.06. The rupee finally settled at 68.92, down 12 paise over its previous close.

The rupee had settled at 68.80 against the US dollar on Friday.

"Indian sovereign bonds fell after the Reserve Bank of India Governor Shaktikanta Das said further rate cuts will depend on incoming economic data.

This statement has turned down the expectations of large easing in upcoming monetary policy," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities.

Brent crude futures, the global oil benchmark, rose 1.49 per cent to USD 63.40 per barrel.

"Brent crude prices heading for its biggest gain in more than a week, after Iran's seizure of a British tanker fanned concerns of a confrontation that could disrupt Middle East supplies," Sharma added.

The dollar index, which gauges the greenback's strength against a basket of six major currencies, moved up by 0.09 per cent to 97.23.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 950.15 crore Friday, provisional data showed.

Meanwhile, the 10-year government bond yield was at 6.42 per cent on Monday.

Going ahead, global cues are expected to dictate terms to the Indian rupee, traders said.

"The ECB meeting on Thursday, the US Q2 preliminary GDP print on Friday and the FOMC meeting on July 31, wherein market participants expect a rate cut, would be the focal points of currency traders," said Rajesh Cheruvu, The Chief Investment Officer of Validus Wealth.

Meanwhile, Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 68.8249 and for rupee/euro at 77.5161. The reference rate for rupee/British pound was fixed at 86.2248 and for rupee/100 Japanese yen at 63.93.