The rupee pared its initial losses, but was still trading down by 29 paise at 67.37 against the American currency in late morning deals after RBI Governor Raghuram Rajan said no to a second term in the post.
Sustained bouts of dollar demand from banks and importers amid bearish US dollar overseas also weighed on the rupee.
The Indian unit opened sharply lower by 57 paise at 67.65 against last Friday's closing level of 67.08 at the Interbank Foreign Exchange (Forex) market.
The domestic unit hovered in a range of 67.70 and 67.32 during the morning deals before quoting at 67.37 at 1040 hrs.
The dollar index was trading down 0.48 per cent at 93.48 against a basket of six currencies in the early trade.
In overseas trade, oil prices extended gains in Asia on the back of a weaker US dollar and easing fears of UK's exit from the European Union.
The US dollar fell for the fourth day in a row early today, trading lower against most major currencies, making the dollar-priced commodity cheaper for those using other currencies and pushing up the demand.
Meanwhile, the benchmark Sensex was trading higher by 67.19 points, or 0.25 per cent, to 26,693.10 at 1040 hrs.
Meanwhile, domestic bourses staged a smart turnaround
recouping the overnight losses following heavy buying in rate sensitive counters and also supported by Q2 corporate earnings reports.
The benchmark BSE Sensex jumped over 145 points to end at 28,129.84 and broader Nifty rose 40.30 pts to 8,699.40.
Foreign portfolio investors (FPIs) once again turned sellers and sold shares worth a net Rs 282.77 crore yesterday.
In the forward market, premium for dollar remained sluggish on the back of sustained receiving by exporters.
The benchmark six-month premium for March dropped to to 151-153 paise from 157-159 paise and the forward-September 2017 contract also slumped to 325-327 paise from 332-334 paise yesterday.
Crude prices were softer on Thursday after two-day steep rally on positive comments from Saudi Arabia's energy minister that the global oil industry would soon exit its two-year funk and prices could rise sharply on a looming supply shortage.
Brent crude was down 0.2 per cent at USD 52.55 a barrel.
