The Indian rupee dropped 12 paise to 61.91 against the US dollar in the late morning trade on fresh dollar demand from banks and importers despite firm local equity market.
The Indian rupee resumed lower at 61.85 per US dollar as against the last closing level of 61.79 at the Interbank Foreign Exchange (Forex) Market and dropped further to 61.98 before quoting at 61.91 per dollar at 1100 hrs.
Indian rupee hovered in a range of 61.85-61.98 per US dollar during the morning deals.
The Indian rupee had gained 16 paise to close at over one-week high of 61.79 against the US dollar on Tuesday after exporters sold the American currency as the forex and money markets remained closed yesterday for "Christmas" holiday.
Meanwhile, crude edged higher in early trade in Asian markets on supply concerns following escalating violence in oil-producer South Sudan, but gains were capped as dealers sat on the sidelines awaiting fresh leads after the festive season.
New York's main contract, West Texas Intermediate for February delivery, was up 27 cents at USD 99.49.
The Indian benchmark Sensex rose by 55.03 points or 0.26 per cent to 21,087.74 at 1100 hrs.
Rupee slips against US dollar in early trade, losses seen limited
(Reuters) The rupee is trading weaker at 61.91/92 versus its close of 61.79/80 on Tuesday. Further losses are likely to be limited as exporters will come in to sell dollars close to 62 levels.
Financial markets were closed on Wednesday for Christmas.
Most Asian currencies trading flat-to-slightly weaker compared to the dollar.
The dollar hit a five-year high against the yen on Thursday and held firm against other currencies on expectations the U.S. economy will continue a solid recovery, allowing the Federal Reserve to gradually withdraw its stimulus next year.
Traders will watch the domestic share market for cues on the direction of foreign fund flows.