The rupee depreciated by 5 paise to 83.18 against the US dollar in early trade on Friday due to unabated foreign fund outflow amid rising crude oil prices.

Negative equity market sentiment and a strong dollar also weighed on the Indian currency, forex traders said.

At the interbank foreign exchange, the domestic unit opened weak at 83.17 against the dollar and then touched the lowest level of 83.20 against the greenback. It later traded at 83.18 against dollar, registering a loss of 5 paise over its previous close.

On Thursday, the rupee settled 15 paise higher at 83.13 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.03 per cent to 106.28.

Analysts attributed the decline in rupee to a record rise in US Treasury yield even as US Federal Reserve Chair Jerome Powell on Thursday hinted at a longer period of monetary tightening due to higher-than-expected inflation numbers.

"Trading boundaries are now set at 83.07 on the downside and 83.26 on the upside, with 83.20, appearing as a potential turnaround point for the day," Anand James, Chief Market Strategist at Geojit Financial Services, said in his USD-INR outlook.

Global oil benchmark Brent crude futures rose 0.94 per cent to USD 93.25 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 161.15 points or 0.25 per cent lower at 65,468.09. The broader NSE Nifty declined 52.15 points or 0.27 per cent to 19,572.55.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday as they sold shares worth Rs 1,093.47 crore, according to exchange data.

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