The rupee depreciated 3 paise against the US dollar on Tuesday after the Reserve Bank of India announced the policy rates keeping the key rates unchanged.

Rupee fell to 66.87 against the US dollar. It opened at 66.78. RBI kept the policy repo rate under the liquidity adjustment facility unchanged at 6.5 per cent.

"Re should be rangebound at the current level as the policy is supportive of the currency and will not depreciate," said NS Venkatesh head of treasury IDBI BankBSE -0.36 %. "At system level there will be no impact of FCNRB. Once the event is over, we will have to reassess the situation."

Dealers expect rupee to remain at 66.65-67.10 levels against the US Dollar till mid September.

"The Reserve Bank will continue with both domestic liquidity operations and foreign exchange interventions that should also enable management of the FCNR(B) redemptions without market disruptions," said RBI in the policy statement. "With a view to further front-loading the provision of liquidity, it has been decided to conduct an open market purchase auction on August 11, 2016."

Forex dealers said strength in the dollar against some other currencies overseas and a weak trend in the domestic equity market in early trade also weighed on the rupee.

The local currency has closed lower at 66.84 on fresh dollar demand form banks and importers on the back of strong dollar in overseas markets on Monday.

The benchmark BSE Sensex was trading 19.34 points, or 0.07 per cent, down at 28,127.37 post policy statement.

Sources :economictimes.indiatimes.com