The rupee declined two paise to 68.69 against the US dollar in early trade on Tuesday due to month-end dollar demand amid weakness in the domestic equity market.
Traders turned cautious ahead of the RBI monetary policy committee's (MPC) meet outcome, scheduled on Wednesday.
Increased month-end demand for the American currency from importers and banks amid fresh foreign fund outflows also weighed on the rupee.
On a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 234.04 crore on Monday, as per provisional data.
Forex dealers said the rise of yen against the greenback as investors braced for the highly-anticipated policy decision later in the day from the Bank of Japan, capped the rupee's fall.
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On Monday, the rupee fell 2 paise to 68.67 against the US currency to end its three-session gaining streak.
Meanwhile, the benchmark BSE Sensex slipped from its record high, falling 113 points, or 0.30 per cent, to 37,381. NSE Nifty too fell 35 points, or 0.31 per cent, to 11,284 in early trade on Tuesday.
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