The rupee depreciated by 27 paise to close at nearly three-week low of 73.95 against the US dollar Wednesday as the American currency strengthened against major global currencies overseas amid steady capital outflows.

Forex traders said increased demand for the US currency from importers and concerns around the rift between the government and the RBI weighed on the local unit.

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“Multiple reports of the government invoking Section 7 of the RBI Act to issue directives to the RBI and also rumour about the likely resignation of the RBI Governor had the markets worried, and even pushed the rupee lower beyond the Rs 74 level,” said Joseph Thomas, Head Research-Emkay Wealth Management.

After opening lower at 73.91, the rupee had plunged to the day’s low of 74.14 as investors turned nervous over reports of rift between the RBI and the government.

However, the rupee pared some of its losses to reach the day’s high of 73.79 after the Finance Ministry in a statement stressed that the government has “nurtured and respected” the autonomy of the central bank and has been holding extensive consultations with it on many issues.

The rupee finally settled down by 27 paise or 0.37 per cent at 73.95, a level not seen since October 11. The rupee on Tuesday had also depreciated 23 paise to close at 73.68 against the US dollar.

The currency, which touched the all-time closing low of 74.39 in October, closed the month with total losses of 104 paise or 1.43 per cent due to a strengthening dollar, firming oil prices and trade worries.

Globally, Brent crude, the international benchmark, was trading 0.45 per cent higher at USD 76.25 per barrel.

Foreign funds pulled out Rs 1,592.02 crore from the capital markets on a net basis, while domestic institutional investors bought shares worth Rs 1,363.04 crore Tuesday, provisional data showed.

The 30-share Sensex rallied 550.92 points, or 1.63 per cent, to close at 34,442.05, while the broader NSE Nifty surged 188.20 points, or 1.85 per cent, to end above the 10,350 mark at 10,386.60.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 73.9936 and for rupee/euro at 83.9250. The reference rate for rupee/British pound was fixed at 94.1016 and for rupee/100 Japanese yen at 65.36.