Oil prices rose on Friday after fresh U.S.-Iran hostilities dampened hopes of progress on reopening the Strait of Hormuz.
The rupee fell 36 paise to 94.58 against US dollar in early trade on Friday, triggered by renewed fighting between the U.S. and Iran, threatened a fragile ceasefire.
Sensex also declined 353.50 points to 77,491.02 in early trade; Nifty drops 109.25 points to 24,225.20.
The currency had gained more than 1% over the previous two sessions, rebounding from the record low of 95.4325 touched earlier this week.
Oil prices rose on Friday after fresh U.S.-Iran hostilities dampened hopes of progress on reopening the Strait of Hormuz.
Iran accused Washington of violating a month-long ceasefire, while the U.S. said it launched retaliatory strikes after Iranian fire targeted its naval vessels transiting the strait on Thursday.
However, U.S. President Donald Trump said the ceasefire remained in place and that Washington was awaiting Tehran’s response to its latest peace proposal.
Brent crude, which had fallen to $96 on Thursday amid hopes of peace, has since climbed above $100 to around $101.50.
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A series of central bank measures aimed at supporting the rupee has had only a limited impact.
Market participants said a sustained recovery would depend on oil prices stabilising and related dollar outflows easing.
Persistent dollar demand from oil refiners continues to weigh on the rupee, prompting importers to step up hedging activity.
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