The rupee on Friday fell 17 paise to 49.67 against the US dollar in early trade on the Interbank Foreign Exchange market, following increased demand for the American currency from importers.
However, a higher opening in the equity market capped the rupee's losses.
Dealers said apart from dollar gains against the euro, increased demand for the dollar from importers mainly weighed on the rupee sentiment.
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The rupee had ended lower by 35 paise at 49.50/51 against the American currency on Thursday.
The Bombay Stock Exchange benchmark Sensex rose 44.30 points, or 0.25 per cent, to 17,875.05 in early trade on Friday.