The rupee weakened by 15 paise to 95.56 against the US dollar in early trading on Wednesday, weighed down by a surge in crude oil prices following fresh tensions in West Asia.
Forex traders said the USD/INR pair opened on a negative note after US President Donald Trump said Iran was responsible for downing an American military helicopter near the Strait of Hormuz and that the US "must" respond to the attack.
At the interbank foreign exchange market the rupee opened at 95.52, then lost ground and touched 95.56 in initial trade, registering a fall of 15 paise from its previous close.
On Tuesday, the rupee appreciated 20 paise to close at 95.41 against the US dollar.
According to traders, the Indian rupee is trading with a negative bias and remains under severe pressure due to renewed geopolitical tensions in West Asia.
As India heavily relies on energy imports, any spike in global crude oil prices directly widens the trade deficit and weakens the domestic currency, they said.
The United States launched retaliatory strikes against Iran after an American Apache helicopter was downed near the Strait of Hormuz.
In response, Iran's Islamic Revolutionary Guard Corps (IRGC) launched retaliatory drone and long-range missile strikes targeting US facilities across the region.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.94, up 0.03 per cent.
Brent crude, the global oil benchmark, was trading higher by 0.73 per cent at USD 92.12 per barrel in futures trade.
On the domestic equity market front, Sensex climbed 303.73 points to 74,222.49 in early trade, while the Nifty was up 85.40 points to 23,327.50.
Foreign institutional investors offloaded equities worth Rs 4,566.03 crore on a net basis on Tuesday, according to exchange data.
(With inputs from PTI)