The rupee recovered from its all-time low level and rose 18 paise to 82.82 against the U.S. dollar in early trade on January 4 on easing crude oil prices.
Forex traders said sustained foreign fund outflows and a weak trend in domestic equities weighed on investor sentiments and restricted the appreciation bias.
At the interbank foreign exchange, the domestic unit opened at 82.87 against the dollar, then gained further ground to touch 82.82, registering a rise of 18 paise over its previous close.
On Tuesday, the rupee slumped 22 paise to close at its all-time low of 83 against the dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.05% to 104.46.
Brent crude futures, the global oil benchmark, declined 0.11% to $82.01 per barrel.
"The trend over the last several sessions has been that the rupee underperforms amid broad dollar weakness due to persistent bids from oil companies and likely RBI as well," IFA Global Research Academy said in a research note.
The rupee weakened to 83 in offshore trading but recovered overnight. It is likely to trade in a familiar 82.65-82.95 range with sideways price action, it added.
In the domestic equity market, the 30-share BSE Sensex was trading 184.42 points or 0.30% lower at 61,109.78. The broader NSE Nifty fell 56.80 points or 0.31% to 18,175.75.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth ₹628.07 crore, according to exchange data.
