In early tarde on Friday, the rupee lost 13 paise to trade at 81.43 against the US dollar, hurt by rising crude oil prices and a flat domestic equity market.
According to FX traders, ongoing withdrawals of foreign funds further dampened investor morale.
At the interbank foreign exchange, the local unit started out weakly versus the dollar at 81.32 before dropping to 81.43 and losing 13 paise from its previous level.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.07 per cent to 102.31, as the annual rate of headline inflation in the US retreated in December.
Brent crude futures fell 0.36 percent to USD 83.73 per barrel, the global oil benchmark.
In the domestic equity market, the 30-share BSE Sensex was trading 279.76 points or 0.47 per cent lower at 59,678.27. The broader NSE Nifty fell 74.05 points or 0.41 per cent to 17,784.15.
Foreign institutional investors (FIIs) turned net sellers in the capital markets on Thursday as they offloaded shares worth Rs 1,662.63 crore, according to exchange data.
Meanwhile, on the domestic macroeconomic front, India's industrial production growth rose to a five-month high of 7.1 per cent in November on the back of better showing by manufacturing, according to official data released on Thursday.
The results show that in December 2022, retail inflation decreased to a one-year low of 5.72 percent, primarily as a result of a fall in vegetable costs.
According to experts, the Reserve Bank has some leeway to temporarily halt the interest rate hike that has been ongoing since May last year because the Consumer Price Index (CPI) has remained below 6% for the second consecutive month.
With inputs from Agencies.
