The rupee depreciated 13 paise to 82.80 against the US dollar in early trade on Monday, after the central bank said it will withdraw the highest value currency note from circulation. At the interbank foreign exchange, the domestic unit fell to 82.80 in initial trade, registering a decline of 13 paise over its last close.

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On Friday, the rupee settled at 82.67 against the dollar.

Traders will also assess the impact of liquidity after the RBI's withdrawal of the highest denomination currency note from circulation, said Sriram Iyer Senior Research Analyst - Commodities & Currencies Reliance Securities Limited.

Moreover, doubts emerged about the debt-ceiling negotiations and a possible default could hurt the US economy and ultimately hurt sentiments back home.

The Reserve Bank of India (RBI) on Friday made the surprise announcement but gave the public time till September 30 to either deposit Rs 2,000 notes in accounts or exchange them at banks.

It said it had asked banks to stop issuing Rs 2,000 notes with immediate effect.

However, markets could find support as the dollar was marginally weak on Monday on a slightly less hawkish Jerome Powell's comments on rates, Iyer added.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.14 per cent to 103.04.

Brent crude futures, the global oil benchmark, rose 0.87 per cent to USD 74.92 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 254.67 points or 0.41 per cent higher at 61,984.35. The broader NSE Nifty declined 86.50 points or 0.48 per cent to 18,289.90.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday as they offloaded shares worth Rs 113.46 crore, according to exchange data.

Meanwhile, rising for the second consecutive week, India's forex kitty jumped USD 3.553 billion to USD 599.529 billion for the week ended May 12, the RBI said on Friday. The overall reserves had jumped by USD 7.196 billion to USD 595.976 billion for the previous week.