The rupee slipped 2 paise to 83.42 against the US dollar in early trade on Thursday, tracking the outflow of foreign capital amid volatile domestic equity markets.
Forex traders said a strong American currency also weighed on the local unit even as retreating crude oil prices capped the rupee's sharp fall.
At the interbank foreign exchange market, the local unit opened at 83.42 and slipped further to 83.44. It soon recovered to trade at 83.42 against the greenback, registering a loss of 2 paise from its previous closing level.
On Wednesday, the rupee plunged 22 paise to close at 83.40 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 105.10, higher 0.06 per cent.
Analysts attributed the higher dollar index to the rising US Treasury yield amid the hawkish stance of the US Federal Reserve.
Also, they said that market participants will closely monitor the US GDP data for the first quarter (second estimate), weekly job reports and pending home sales numbers to be released later in the day.
Brent crude futures, the global oil benchmark, fell 0.05 per cent to $83.56 per barrel.
On the domestic equity market, the 30-share BSE Sensex was trading 227.31 points, or 0.31 per cent lower at 74,275.59 points. The broader NSE Nifty fell 62.20 points or 0.27 per cent to 22,642.50 points in initial trade.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, selling shares worth ₹5,841.84 crore, according to exchange data.