The rupee Wednesday declined 23 paise to 69.85 against the US dollar in early trade due to higher demand for the greenback from importers amid foreign fund outflows.
A strengthening US dollar against major global currencies also affected rupee's trading pattern, forex dealers said.
However, lower crude prices and a higher opening of the domestic equity markets restricted fall of the domestic currency to some extent, they added.
At the Interbank Foreign Exchange (forex) market, the rupee opened sharply lower at 69.80 against the US dollar, and further fell to quote at 69.85, a decline of 23 paise over its previous close.
On Tuesday, the rupee had appreciated by 5 paise to settle at 69.62 against the US dollar.
Foreign institutional investors (FIIs) emerged as net sellers in capital markets, pulling out Rs 237.47 crore on Tuesday, provisional exchange data showed.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.03 per cent to 97.66.
The BSE Sensex was trading 75.37 points or 0.20 per cent higher at 38,640.25 in early trade. The NSE Nifty too rose 21.15 points or 0.18 per cent to 11,597.10.
Meanwhile, global benchmark Brent crude declined by 0.54 per cent to USD 74.11 per barrel.