Heavy dollar demand from banks and importers on Tuesday pulled down the rupee by 24 paise to end at 54.38, extending losses for the second straight session.
However, a stable stock market and some capital inflows capped the local currency's fall to some extent, forex dealers said.
The rupee resumed lower at 54.24 against the dollar from its last closing level of 54.14 per dollar at the Interbank Foreign Exchange market.
It hovered in a range of 54.24 per dollar and 54.42 during the day, before settling at 54.38, a net loss of 24 paise, or 0.44 per cent.
Foreign institutional investors pumped in Rs 226.21 crore into local equities today, as per BSE provisional data.
"Rupee continued with its weak trend for the second straight session. Euro falling below 1.30 and dollar index moving above 83.00 levels contributed to the weakness in the rupee," said Abhishek Goenka (Founder & CEO, India Forex Advisors).
In the global market, the euro fell below the key $1.30 level against the dollar today a level it hasn't seen since early April, after reports said that private-sector activity across the 17-nation