The rupee depreciated 7 paise to 81.95 against the US dollar in early trade on Wednesday, tracking elevated level of the American currency against major rivals overseas as well as higher crude price.

Crude oil prices hovering above USD 83 per barrel and cautious move by investors ahead of the US Federal Reserve's interest rate decision later in the day weighed on the domestic unit, even as robust sentiment in the domestic market capped the fall, forex traders said.

At the interbank foreign exchange, the domestic unit opened at 81.89. It touched the peak of 81.87 and hit the lowest level of 81.96 before trading at 81.95 against the greenback, registering a fall of 7 paise from its previous close.

On Tuesday, the rupee had settled at 81.88 against the dollar.

"After achieving the 81.75 objective, downsides eased, allowing a pull back. If early dips are held above 81.82, expect upswings today to aim for 82-82.15. We will wait for push below 81.5 to play strong downsides," Anand James, Chief Market Strategist at Geojit Financial Services, said in his USD-INR outlook.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell marginally by 0.01 per cent to 101.34.

Brent crude futures, the global oil benchmark, was trading 0.43 per cent lower at USD 83.28 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 317.49 points or 0.48 per cent higher at 66,673.20. The broader NSE Nifty advanced 79.20 points or 0.40 per cent to 19,759.80.

Foreign Institutional Investors (FIIs) turned net buyers in the capital markets on Tuesday as they bought shares worth Rs 1,088.76 crore, according to exchange data.

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