The Indian rupee fell by 5 paise to 85.69 against the US dollar in early trade on Wednesday, marking the first trading session of the year. The decline came as the American currency strengthened in global markets, coupled with persistent outflows of foreign funds, which pressured the rupee lower.

Forex traders noted that the rise in the US dollar index (DXY) and the upward movement in US 10-year bond yields were contributing factors. These trends are largely attributed to the Federal Reserve's cautious stance, along with external factors such as the "Trump factor," influencing global market sentiments. The impact of these factors was felt as global trading volumes remained subdued due to the ongoing holiday season in major economies, including the UK and parts of Europe.