The rupee depreciated by 11 paise to close at 68.82 against the US dollar on Wednesday due to foreign fund outflows and rising crude oil prices.

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Forex traders said cautious trading in the domestic equity markets also weighed on the local unit. However, weakening of the greenback vis-a-vis other currencies overseas supported the rupee to some extent.

At the interbank foreign exchange (forex) market, the domestic currency opened at 68.69 per dollar, but lost ground during the day and finally settled at 68.82, down 11 paise over its previous close.

The rupee had settled at 68.71 against the US dollar Tuesday.

"The rupee slipped along with other emerging-market currencies amid better than expected US economic data. The foreign fund outflows from the domestic equity market also weighed on the rupee. For the month, they have sold $770 million in the equity market," said V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities.

Brent crude futures, the global oil benchmark, climbed 1.07 per cent to $65.04 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.08 per cent to 97.31.

Market benchmark BSE Sensex extended its gains for the third consecutive session. The 30-share index settled 84.60 points or 0.22 per cent higher at 39,215.64. The broader NSE Nifty ended 24.90 points or 0.21 per cent up at 11,687.50.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 16.97 crore Wednesday, provisional data showed.

Meanwhile, the 10-year government bond yield was at 6.35 per cent Wednesday.

"Indian Sovereign bonds fell after a five-day rally after Jalan Committee recommended transfer of reserve with RBI in tranches to the government," Sharma said.

The Bimal Jalan committee constituted to assess the optimum size of capital reserves that the RBI should hold Wednesday finalised its report.

Regarding the quantum of surplus transfer from the RBI to the government, sources said, it cannot be disclosed at the moment but transfer would be periodic and would spread over 3-5 years.

Meanwhile, Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 68.5672 and for rupee/euro at 77.1838. The reference rate for rupee/British pound was fixed at 85.7657 and for rupee/100 Japanese yen at 63.45.