The Indian rupee declined 2 paise to 81.96 against the US dollar (22.33 versus the UAE dirham) in early trade on Thursday amid weak sentiments in the Asian markets and upward movement in the crude oil price.

According to forex traders, positive sentiments in the Indian equities market and inflow of foreign funds provided support to the currency.

At the Indian interbank foreign exchange, the South Asian currency opened weak at 81.97 against the dollar and touched 81.93. It slipped to 81.96 against the American currency, registering a fall of 2 paise over its previous close.

On Wednesday, the rupee closed at 81.94 against the US currency.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.02 per cent to 101.50.

Brent crude futures, the global oil benchmark, advanced 0.71 per cent to $76.95 per barrel.

Traders are also awaiting inflation data, which will provide cues for the Reserve Bank of India's s next monetary policy moves.

"Slippage past 81.97 diffused the upside momentum, rendering the trend sideways again. Should 81.85 hold, expect another upswing, which though is less likely to be directional, until 82.2 is broken," Anand James, Chief Market Strategist at Geojit Financial Services, said.

Foreign Institutional Investors (FIIs) were net buyers in the capital market on Wednesday as they purchased shares worth Rs18.33 billion, according to exchange data.

In the Indian equity market, the 30-share BSE Sensex rose 41.24 points or 0.07 per cent to 61,981.44 points on Thursday. The broader NSE Nifty inched up 5.55 points or 0.03 per cent to 18,320.65 points.

(With inputs from PTI)

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