The rupee weakened to 68.23 due to heavy capital outflows from the domestic equity market as investors remained cautious ahead of Donald Trump's inauguration as the US president later in the day.
According to forex dealers, dollar’s weakness against other currencies overseas after Fed Chair Janet Yellen indicated the central bank would take a wait-and-see approach to monetary policy, suggesting any rate hikes this year could be slow, minimised the rupee's losses.
The domestic unit opened higher at 68.05 against the previous close of 68.13 at the Interbank Foreign Exchange market today.
It hovered in a range of 68.23 and 68.03 before quoting at 68.23, down 10 paise at 3.45 pm local time.
Meanwhile, the 30-share BSE index Sensex ended the session down by 274.10 points or 1.00 per cent at 27,034.50.
In the overseas market, the dollar inched down before US President-elect Donald Trump's inauguration, as further comments from Federal Reserve chief Janet Yellen were perceived as less hawkish than what she said the previous day.
The US currency, up 10 percent against a basket of others since Trump's election victory in November, has fallen almost 2 per cent so far in January as concerns grew over his protectionist bent and attitude to dollar strength.
It edged down less than 0.1 per cent on the day in early deals in Europe and was 0.2 per cent lower for the week. Against the euro, it hovered just below $1.07.