The rupee declined by 5 paise to 71.31 against the US dollar in early trade on Friday as spread of a deadly new virus from China kept investors edgy.
Besides, rise in crude oil prices and lower opening in the domestic equity market also impacted the rupee movement, forex dealers said.
However, fresh foreign fund inflows supported the Indian currency, they added.
At the interbank foreign exchange market, the rupee opened weak at 71.34, but it recovered some lost ground to touch 71.30 against the US dollar in morning trade.
The domestic currency had settled at 71.26 against the American currency on Thursday.
According to reports, coronavirus infection has killed at least 25 people, while the number of confirmed cases has increased to 830.
Brent crude futures, the global oil benchmark, rose 0.06 per cent to USD 62.08 per barrel.
The BSE benchmark Sensex was trading 71.95 points or 0.17 per cent lower at 41,314.45. Similarly, the broader NSE was trading 17.85 points, or 0.15 per cent, down at 12,162.50.
The dollar index, which gauges the greenback's strength against a basket of six currencies, inched up 0.02 per cent to 97.70.
Foreign institutional investors bought equities worth Rs 1,352.13 crore on a net basis on Thursday, provisional exchange data showed.
The 10-year Indian government bond yield was at 6.60 per cent.