This is rupee's lowest closing since 55.45 on November 27, 2012.
Forex dealers said weakness in local equities and a firm dollar overseas against other currencies also weighed on the rupee.
Indian stocks and the rupee have benefitted from dollar liquidity induced by the US Fed stimulus.
The rupee on Tuesday lost 11 paise to Rs 55.85 against the US dollar in early trade on the Interbank Foreign Exchange following dollar gains against other currencies overseas amid a weak trend in the equity market.
The dollar index was up by 0.04 per cent against a basket of six major global rivals.
At Forex market, the domestic unit commenced lower at 53.95 a dollar from previous close of 53.81and moved in a restricted range of 53.88 and 54.06 before settling at 53.94, showing a fall of 13 paise, or 0.24 per cent.
The rupee had gained by 57 paise, or 1.04 per cent, in previous two days.
Fresh demand for the American unit from importers put pressure on the rupee.
Month-end dollar demand from importers mainly affected the rupee value against the dollar, a forex dealer said.
The rupee commenced stable at its last closing level of 53.96 at the Interbank Foreign Exchange market.
Forex dealers said strength in euro against the US dollar overseas and increased capital inflows supported the rupee.
Due to weakness in domestic equities and strong dollar demand, rupee shed its month and a half high against follar.
Strengthening of euro against the dollar in overseas market and a higher opening in the equity market supported the rupee.
The dollar index was up by 0.04 per cent against a basket of six major global rivals.
With Indian stocks under pressure, the rupee tumbled to a low of 54.89 on emergence of dollar demand from importers and some banks on expectations of further rise in dollar overseas.
Forex dealers said continued capital inflows and a weak dollar overseas also supported the local currency.
The dollar index was down by 0.03 per cent against a basket of six major rivals as Euro rose against the dollar after the Cyprus reached bailout agreement.
The dollar index was down by 0.16 per cent against its six major global rivals.
Bearish domestic equities restricted the rupee rise.
The local currency had lost 16 paise to close at 54.17 on Monday due to fresh dollar demand from importers and some banks.
Fresh dollar demand from importers and some banks on the back of smart rise in the US dollar ahead of RBI monetary policy meeting on Tuesday also weighed on the rupee, said forex dealers.
The rupee on Wednesday gained 14 paise to 54.04 against the dollar in early trade at the Interbank Foreign Exchange on sustained selling of the US currency by exporters and banks.
The rupee fell back sharply against the pound sterling at 83.28 from Monday's close of 82.49 and also reacted downwards against the euro to 71.59 from 71.29.
The rupee resumed lower at 54.37 per dollar as against the last closing level of 54.07 at the Interbank Foreign Exchange Market.
Forex dealers said euro's gains against the American currency in the overseas market also supported the rupee.
The rupee resumed lower at 54.43 per dollar as against the last weekend's level of 54.22 at the Interbank Foreign Exchange market.
Dealers said the country's trade balance numbers were inline with expectations as India's exports rose an annual 0.8 per cent in January and imports for the month rose 6 per cent, leaving a trade deficit of $20 billion.
The rupee on Tuesday fell by 12 paise to 53.97 against the dollar in early trade, extending losses for the fifth straight session at the Interbank Foreign Exchange (Forex) market due to sustained demand for the US currency from importers.
Rupee fell to 45.03 in the Interbank Foreign Exchange Market against the dollar in morning trade today on worries of capital outflows which may increase because of equity sales by foreign investors.
Extending losses for the third straight session, the rupee today lost 28 paise to end at an over one-week low of 53.50, due to sustained dollar demand from importers amid sluggish local stocks.
Erasing early gains, the rupee on Thursday closed six paise lower at 53.22 due to sustained dollar demand after government estimates pegged ongoing fiscal's GDP growth at a decade low of five per cent.
Forex dealers said slight weakness in dollar overseas capped the rupee's losses to some extent.
This is the second biggest rise since September 21 last year, when rupee had gained by 93 paise, or 1.71 per cent.
Tracking the strong uptick in stock markets and early dollar sales by exporters, the rupee improved further to log nearly a two-week high of 54.34.
Forex dealers said bouts of heavy dollar demand from banks and oil importers amid lower equities attributed the rupee sentiment.
Forex dealers said besides dollar's gains against euro and yen overseas, increased demand from oil importers for the American currency and a weak opening in the stock market also put pressure on the rupee.
Fresh bouts of dollar demand from banks and importers mainly attributed to rupee sentiment, though sustained foreign capital inflows restricting its further fall, a dealer said.
The rupee had gained 17 paise to close at one-week high of 54.77 against the dollar on fresh selling of the US currency by exporters and capital inflows in the previous session on Friday.
The rupee had gained 11 paise to end at one-week high of 54.84 against the US dollar in Wednesday's trade on sustained selling of the US dollar by exporters and capital inflows.
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