The rupee depreciated by 17 paise to 71.95 against the US dollar in early trade on Thursday, tracking weak domestic equity market and persistent foreign fund outflows.
Pessimism over US-China trade talks also put pressure on the domestic unit, forex dealers said.
However, a weak dollar against other major currencies overseas and softening crude prices restricted the rupee’s fall, they added.
At the interbank foreign exchange, the rupee opened weak at 71.96 and fell further to 72.05 against the US dollar. The domestic currency, however, pared some losses and was trading at 71.95.
The rupee fell 29 paise to close at 71.77 against the US dollar on Wednesday.
The BSE Sensex was trading 215.51 points, or 0.58 per cent, lower at 37,236.33, while the broader Nifty fell 58.90 points, or 0.53 per cent, to 10,987.20 in early trade.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 935.27 crore on Wednesday, as per provisional data.
Meanwhile, investors remained edgy over concerns about developments in the China-US trade talks.
Brent crude futures, the global oil benchmark, declined 0.63 per cent to USD 60.11 per barrel.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.02 per cent to 98.19.
The 10-year government bond yield was up at 6.57 per cent in morning trade.