The Indian rupee extended losses for a fourth session on Tuesday, dropping 8 paise to 70.81 against the US dollar ahead of the RBI's monetary policy decision.

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Unabated foreign fund outflows and higher crude oil prices have taken a toll on the domestic currency's health.

At the interbank foreign exchange (forex) market, the domestic currency opened at 70.80 a dollar and touched a high of 70.47 and low of 70.89 during the day.

The local unit finally closed at 70.81 against the American currency, down 8 paise over its previous close.

In the past four sessions, the Indian unit has lost 202 paise.

On Monday, the domestic currency had suffered the biggest single-day drop in past six years -- closing at a five-month low of 70.73 a dollar. Overall sentiment was hit by heavy capital outflows by investors anxious over the US-China trade tension, a sharp devaluation in yuan and uncertainty over Kashmir issue.

Forex traders said the rupee is trading in a narrow range ahead of the outcome of Reserve bank of India's monetary policy review meet.

With inflation under control, experts are expecting another 25 basis points rate cut by the RBI for a fourth time in a row to boost economic activities.

The Monetary Policy Committee (MPC), headed by Governor Shaktikanta Das, is deliberating on the macro-economic situation and is scheduled to announce its third bi-monthly policy of the ongoing fiscal on Wednesday.

Meanwhile, the worrying trend over foreign investment outflows continued on Tuesday with overseas investors taking Rs 2,107.93 crore out of Indian equities.

Brent crude futures, the global oil benchmark, rose 0.12 per cent to USD 59.88 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.01 per cent to 97.53.

The 10-year government bond yield was at 6.34 per cent on Tuesday.

On the domestic market front, after swinging over 705 points during the day, the 30-share index closed at 36,976.85, up by 277.01 points, or 0.75 per cent. It hit a high of 37,241.77 and a low of 36,536.59.

Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.3584 and for rupee/euro at 78.2686. The reference rate for rupee/British pound was fixed at 85.2556 and for rupee/100 Japanese yen at 66.42.