The Indian rupee depreciated by 40 paise to trade at a 11-week low of 45.99 a dollar in early trade on Wednesday on increased capital outflows and the US currency's gains overseas.
The rupee closed higher by 2 paise at 45.59/60 a dollar in the previous session.
Forex dealers attributed the sharp fall in the rupee to dollar's gains overseas and weak stock markets. The BSE Sensex was down 231.11 points, or 1.36 per cent, at 16,644.65 in the opening trade.
Sustained dollar demand from banks and importers also weighed on the rupee, they said.