The Rupee dropped by 20 paise to 54.75 against the American currency in late morning trade on Thursday on fresh dollar demand from banks and importers despite persistent capital inflows in the equity market.
The Indian rupee resumed lower at 54.67 per dollar as against the last closing level of 54.55 at the Interbank Foreign Exchange Market.
It dropped further to a low of 54.83 before quoting 54.75 per dollar at 1050
In New York market, the US dollar pared losses on Wednesday amid reports that cut into optimism that Washington lawmakers are close to a deal to avoid going over the fiscal cliff.
The euro hit levels against the dollar last seen in April and notched a 17-month high against Japanese yen after a closely watched gauge of German business confidence rose more than expected in December.