The rupee declined 5 paise to 86.40 against the US dollar in early trade on Thursday amid a strengthening greenback.
While a drop in crude oil rates and an upward trend in the domestic equity markets prevented further decline in the local currency, forex traders expected it to remain volatile throughout the day and trade in a wide range of 86.20-86.60.
At the interbank foreign exchange, the rupee opened at 86.46, down 11 paise from its previous close, and dropped further to 86.52.
However, it recovered some of its losses as the equity markets showed an upward trend to rise to 86.40, lower by 5 paise from Wednesday's close.
The domestic currency had appreciated 23 paise to close at 86.35 against the US dollar on Wednesday.
"Exporters may continue to wait with a stop loss at 86.25 since the rupee continues to remain in a weakening mode due to US dollar demand," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"The rupee, which gained yesterday (Wednesday) due to inflows from Vedanta and bond market inflows, opened weaker this morning. The wide range for the day is expected to be 86.20-60," he said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.08 per cent higher at 108.25.
Brent crude, the global oil benchmark, was down 0.34 per cent to USD 78.73 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex rose 151.34 points, or 0.20 per cent, to 76,556.33, while the Nifty rose 51.95 points, or 0.22 per cent, to 23,207.30.
Foreign Institutional Investors (FIIs) remained net sellers in the capital markets on Wednesday, offloading shares worth Rs 4,026.25 crore, according to exchange data.
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