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The rupee plunged 23 paise to close at a five-month low of 86.78 (provisional) against the US dollar on Monday amid a strengthening dollar and volatile crude oil prices following the US strike on Iran's nuclear facilities.

A sharp decline in the domestic equity markets further pressured the rupee, according to forex experts.

However, strong FII inflows, along with a rise in the country's forex reserves prevented further losses in the rupee, they said.

At the interbank foreign exchange the rupee opened at 86.75 against the greenback and traded in the range of 87.67 to 86.85 before settling at its five-month low of 86.78 (provisional), down 23 paise from its previous close of 86.55 on Friday.

The rupee had closed at 86.70 against the dollar on January 13.

"The rupee fell to 86.85 due to higher oil prices in the morning and then oil started to fall and gave importers an opportunity to buy dollars for their near-term imports. The rupee rose to 86.67 but was not able to rise any further as oil demand was quite high," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

"The rupee went back to 85.82 where the Reserve Bank was a seller and kept the rupee movement on hold beyond today's low," he said.

Brent crude, the global oil benchmark, rose 0.08 per cent to USD 77.07 per barrel in futures trade.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.60 per cent higher at 99.29.

"The range of rupee is expected to be 86.50-86.90, depending on how oil prices behave," Bhansali added.

In the domestic equity market, the 30-share BSE Sensex tanked 511.38 points to settle at 81,896.79 while Nifty dropped 140.50 points to 24,971.90.

Foreign institutional investors (FIIs) purchased equities worth Rs 7,940.70 crore on a net basis on Friday, according to exchange data.

The latest weekly data released by the Reserve Bank of India on Friday showed India's forex reserves rising USD 2.294 billion to USD 698.95 billion during the week ended June 13. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)