The rupee edged 3 paise lower to hit its all-time low of 83.41 against the US dollar in early trade on Tuesday, tracking higher demand for the American currency from importers.
Forex traders said investors are awaiting cues from the Reserve Bank of India's monetary policy outcome.
The Monetary Policy Committee of the central bank will begin its bi-monthly review meeting on Wednesday and announce the decision on Friday.
At the interbank foreign exchange market, the local unit opened at its all-time low level of 83.41 against the greenback, registering a fall of 3 paise over its previous close.
On Monday, the rupee settled at 83.38 against the US dollar, even as domestic benchmark indices ended the day on a positive note and hit lifetime high levels.
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Volatility is expected to remain elevated ahead of important economic numbers that will be released from the US. On the domestic front, focus will be on the RBI policy statement; expectation is that the central bank could keep rates on hold and any dovish comments could trigger a fall in the rupee, said Gaurang Somaiya, forex and bullion analyst, Motilal Oswal Financial Services.
"Today, focus will be on the services PMI number and better-than-expected data could extend gains for the greenback. We expect the USD-INR (Spot) to trade sideways and quote in range of 83.20 and 83.50," Somaiya added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.09 per cent lower at 103.62.
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Brent crude futures, the global oil benchmark, slipped 0.05 per cent to USD 77.99 per barrel.
On the domestic equity market front, Sensex advanced 195.13 points, or 0.28 per cent, to 69,060.25 points. The Nifty advanced 56.15 points, or 0.27 per cent, to 20,742.95 points.
Foreign institutional investors were net buyers in the capital market on Monday as they purchased shares worth Rs 2,073.21 crore, according to exchange data.
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