The rupee dipped 1 paisa to 85.87 against the US dollar in early trade on Friday due to a firm American currency and massive outflow of foreign capital.
Higher crude oil prices overseas also weighed on the Indian currency though it found some support tracking positive cues from domestic equity markets, forex traders said.
At the same time, they said, the dollar strengthened on increased demand amid the anticipation of restrictive trade measures by the new US administration under President Donald Trump after January 20.
At the interbank foreign exchange, the rupee opened at 85.88 and moved up a tad to 85.87 against the greenback in initial deals, trading with a loss of 1 paisa from its previous close.
On Thursday, the rupee settled with a gain of 5 paise at 85.86 against the US dollar, recovering from the steep decline of 17 paise in the preceding session.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent higher at 109.03. The 10-year US bond yields also rose to 4.68 per cent.
Brent crude, the global oil benchmark, climbed 0.31 per cent to $77.16 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex was trading 253.40 points, or 0.33 per cent, higher at 77,873.61 points, while the Nifty was up 62.60 points, or 0.27 per cent, at 23,589.10 points.
Foreign institutional investors (FIIs) offloaded ₹7,170.87 crore in the capital markets on a net basis on Thursday, according to exchange data.