The rupee depreciated 13 paise to 81.43 against the US dollar in early trade on Friday weighed down by firm crude oil prices and a muted trend in domestic equities.
Sustained foreign fund outflows further dented investor sentiments, forex traders said.
At the interbank foreign exchange, the domestic unit opened weak at 81.32 against the dollar, then fell to 81.43, registering a decline of 13 paise over its last close.
In the previous session on Thursday, the rupee gained 38 paise to close at 81.30 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.07 per cent to 102.31, as the annual rate of headline inflation in the US retreated in December.
Brent crude futures, the global oil benchmark, declined 0.36 per cent to USD 83.73 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 279.76 points or 0.47 per cent lower at 59,678.27. The broader NSE Nifty fell 74.05 points or 0.41 per cent to 17,784.15.
Foreign institutional investors (FIIs) turned net sellers in the capital markets on Thursday as they offloaded shares worth Rs 1,662.63 crore, according to exchange data.
Meanwhile, on the domestic macroeconomic front, India's industrial production growth rose to a five-month high of 7.1 per cent in November on the back of better showing by manufacturing, according to official data released on Thursday.
Retail inflation declined to a one-year low of 5.72 per cent in December 2022 mainly due to cooling of vegetable prices, according to the data.
Experts believe, with the Consumer Price Index (CPI) remaining below 6 per cent for the second month in a row, the Reserve Bank has some room to pause interest rate hike which has been going on since May last year.