The rupee depreciated by 25 paise to 68.66 against the US dollar in early trade Thursday ahead of the Reserve Bank of India's policy decision and foreign fund outflows. At the Interbank Foreign Exchange, the rupee opened on a weak note at 68.56 then fell further to 68.66 against the US dollar, showing a decline of 25 paise over its previous closing.
The local unit, however, pared some losses and was quoted at 68.62 against the American currency at 0930 hrs.
The rupee had surged by 33 paise to close at 68.41 against the US dollar Wednesday.
Forex traders said below-normal monsoon forecast by private firm Skymet and a probable dovish policy stance by the RBI weighed on the domestic unit. Monsoon rains may be "below normal" this year, Skymet, a private weather forecasting agency, said on Wednesday attributing it to the El Nino phenomenon.
The outcome of the RBI's Monetary Policy Committee (MPC) is expected before noon on Thursday.
Besides, strengthening of the US dollar against some currencies overseas and foreign fund outflows also added pressure on the local unit. However, easing crude prices capped the losses for the domestic unit.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,040.48 crore Wednesday, as per the provisional data.
Brent crude futures, the global oil benchmark, fell 0.04 per cent to USD 69.28 per barrel.
Meanwhile, domestic bourses opened on a cautious note Thursday with benchmark indices Sensex trading 2.38 points down at 38,861.58 and Nifty up 4.75 points at 11,648.70.
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