The rupee appreciated by 10 paise to 82.81 against the US dollar in early trade on Wednesday gaining ground from the 8-month low level amid weakening American currency against major rivals overseas.

However, weak equity markets, outflow of foreign funds and crude prices breaching USD 85 per barrel weighed on the local unit, said analysts.

Participants were trading cautiously awaiting the US inflation data, the UK's GDP number and RBI's monetary policy decision to be announced on Thursday.

At the interbank foreign exchange, the domestic unit opened stronger at 82.83 against the dollar and touched the peak of 82.80.

The rupee later traded at 82.81, registering a gain of 10 paise over its previous close.

On Tuesday, the rupee had settled at more than 8-month low level of 82.91 against the dollar.

"Upside attempts lingered on, but momentum continued to be absent. While we continue to play for 82.90, dips to 82.65 may be expected," 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 by 0.07 per cent to 102.45.

Global oil benchmark Brent crude was trading 0.21 per cent lower at USD 85.99 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 120.66 points or 0.18 per cent lower at 65,725.84. The broader NSE Nifty declined 19.90 points or 0.10 per cent to 19,550.95.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth Rs 711.34 crore, according to exchange data.

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