Rupee depreciated 11 paise to 83.93 against the US dollar in early trade on Thursday due to rising crude oil prices and negative sentiment in the domestic equity markets amid concerns over escalating tension in the Middle East.
Unabated outflow of foreign funds from capital markets and a strengthening American currency also weighed on the Indian currency, forex traders said.
At the interbank foreign exchange, the local unit opened at 83.91 and lost further ground to touch 83.93 against the greenback, trading 11 paise lower from its previous session's closing level.
On Tuesday, the rupee settled 3 paise lower at 83.82 against the American currency. The forex markets were closed on Wednesday on account of Mahatma Gandhi Jayanti.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.10 per cent to 101.53.
Brent crude, the international benchmark, climbed 1.11 per cent to 74.72 in futures trade.
Experts attributed the spike in crude prices to fear of Israeli attacks on Iran's oil installations amid escalating tension in the Middle East.
On the domestic equity market front, the Sensex tumbled 829.97 points or 0.09 per cent to 83,436.32, while the Nifty tanked 270.65 points or 1.05 per cent to 25,526.25.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth ₹5,579.35 crore on a net basis in the cash segment, according to exchange data. FIIs have sold shares worth over ₹15,000 crore since Monday.
Analysts said foreign investors withdrew funds as Chinese stocks turned bullish after the country announced a slew of stimulus measures to revive the economy.
On the domestic macroeconomic front, a monthly survey released on Tuesday showed India's manufacturing sector growth fell to an eight-month low in September amid a softer increase in factory production, sales and new export orders.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) fell from 57.5 in August to 56.5 in September, registering the weakest pace of growth since January.