The rupee declined 12 paise to a fresh 16-month low of 68.12 against a strengthening US dollar in early trade today after China and the US struck a deal to avert a trade war.

Traders attributed the rupee's fall to increased demand for the dollar from importers and banks after US Treasury Secretary Steven Mnuchin said the trade war with China was on hold, amid hopes of easing trade tensions between the two economies.

Higher crude oil prices and losses in Asian currencies to weighed in the domestic unit, they added.

On Friday, the rupee had lost 30 paise to end at 68 against the US currency on renewed dollar buying interest amid global macro challenges.

Meanwhile, the benchmark BSE Sensex recovered 125.65 points, or 0.36 percent, to 34,973.95 in early trade today.