Rupee was trading lower by 10 paise at 66.86 against the US dollar in early trade at the Interbank Foreign Exchange on Thursday.
Dealers attributed the rupee’s fall to increased demand for the US currency from importers and banks.
However, dollar’s weakness against the euro and yen, and a higher opening in domestic equity market restricted the fall.
On Tuesday, the rupee had gained 13 paise to close at 66.76 a dollar as fresh selling of the US currency by exporters and banks helped it snap the two-day fall.
The money market was closed on Wednesday on the occasion of Parsi New Year.
Meanwhile, the BSE Sensex recovered by 165.46 points or 0.59 per cent to 28,170.83 in early deals.