The rupee pared initial gains to settle 17 paise lower at 73.46 against the US dollar on Tuesday due to dollar buying by banks, possibly on behalf of the RBI, and oil importers. At the interbank forex market, the domestic unit opened at 73.17 tracking positive domestic equities and weak greenback, but soon pared the gains and finally closed at 73.46, down 17 paise over its previous close of 73.29.

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During the session, the local unit witnessed an intra-day high of 73.15 and a low of 73.51 against the American currency. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent lower at 93.49.

On the domestic equity market front, the BSE benchmark Sensex surged by 600.87 points or 1.54 per cent to close at 39,574.57, and the broader NSE Nifty climbed 159.05 points or 1.38 per cent to end at 11,662.40. Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 236.71 crore on Monday, according to exchange data.

Brent crude futures, the global oil benchmark, rose 0.51 per cent to USD 41.50 per barrel. The domestic unit came under pressure on Tuesday and fluctuated in the range of 73.15 and 73.51.

"Despite gains in domestic and global equities the rupee was weighed down against the US dollar. Volatility for the greenback is expected to remain high in the next couple of sessions ahead of the RBI policy meeting that is scheduled to begin tomorrow and outcome of the same will be released on Friday," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. According to Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities, "Rupee ended lower Tuesday on likely intervention by the Reserve Bank of India near intra-day low levels, followed by oil importers dollar buying as the crude prices settled higher in last few days. "RBI intervened around Rs 73.15/USD and nationalised banks were on buy side. Range for rupee remains inside 73.10-73.75 broadly," Trivedi said.

The rupee had appreciated to 73.15 earlier this Tuesday morning probably on the back slightly weak US Dollar, improved global risk appetite and possibility of a US fiscal stimulus. "We believe that most of the good news surrounding the fiscal stimulus has been factored in by the markets and could likely witness no reaction when its officially announced by the US," said Sriram Iyer, Senior Research Analyst at Reliance Securities.

According to Iyer, the Indian rupee depreciated this Tuesday for the second consecutive session against the US Dollar amid intervention by the central bank in anticipation of further flows into the country. "Indian rupee was the worst performer among Asian currencies on the back of dollar buying by nationalised banks and recovery on dollar index. Some profit booking has been seen during European hours ahead of ECB President Lagarde and US Fed Chair Powell's speech in global markets," said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.

Technically, spot USDINR is having resistance at 74.07, the convergent point of 50 and 200 DMA, while on downside recent low of 72.75 acts as support, Vakil noted.