The rupee on Monday fell 2 paise to 71.73 against the US dollar in early trade, amid increased demand of the greenback by banks and importers.
Strengthening crude oil prices also impacted the rupee movement in the market, forex dealers said.
However, a higher opening in domestic equity markets and persistent foreign fund inflows restricted the rupee's fall, they added.
At the interbank foreign exchange, the rupee opened strong at 71.68, showing a rise of 3 paise over its previous closing.
The domestic unit, however, paired all its early gains to trade lower at 71.73 against the dollar.
The rupee on Friday had closed at 71.71 against the US dollar.
Meanwhile, brent crude futures, the global oil benchmark, surged 0.21 per cent to USD 63.52 per barrel.
Foreign investors have continued with their bullish outlook and bought equities worth Rs 305.72 crore on Friday, according to provisional data.
Domestic bourses opened on a positive note on Monday with benchmark Sensex was trading 143 points up at 40,502.82 in the opening session and Nifty rose 0.44 per cent to 11,967.20.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.04 per cent to 98.25.
The 10-year government bond yield was at 6.50 per cent in morning trade.