The rupee fell sharply by 15 paise against the US dollar to 83.44 in early trade on Wednesday amid muted trends in the domestic equity markets.
However, a decline in the dollar index and a marginal fall in the Brent crude index prevented further losses in the domestic unit, according to experts.
At the interbank foreign exchange, the local unit opened at 84.38 -- down 9 paise from its previous close -- and then slid further to 84.44, registering a decline of 15 paise from its previous close.
On Tuesday, the rupee pared its intra-day losses to settle flat at 84.29 against the US dollar.
"The Indian banking liquidity fell into deficit as industry players paid Rs 1.6-1.8 lakh crore as GST payment. This was after two months that liquidity has fallen into a deficit as the RBI also intervened into forex markets to defend the rupee weighing on liquidity conditions," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"The rupee may be in the