The fall would have been much more pronounced, had there not been sustained capital inflows worth of over $100 million in equities, forex dealers said.
On Tuesday, the rupee had gained 10 paise to close at 66.52.
The rupee lost 37 paise to end at 62.60 against the dollar on Tuesday following demand for the US currency and a fall in local equities on further rate hike concerns.
The US dollar bought 99.40 yen in Asian trade, compared with 99.21 in North American trade late on Monday.
A higher opening in the domestic equity market and a weak dollar against other currencies overseas on a string of disappointing US data last week also supported the gain in the rupee
Weakening of the dollar against other currencies overseas, following disappointing economic data and a higher opening in the domestic equity market, supported the rupee.
At the Interbank Foreign Exchange market, the domestic unit resumed lower at 54.42 a dollar from last weekend's close of 54.28 and declined further to a low of 54.52 on initial hesitancy in share markets and dollar demand from importers, mainly oil refiners, and some banks.
The dollar index was down by around 0.15 per cent against a basket of six major global currencies.
The rupee had lost 23 paise to end at 54.09 in Tuesday's trade due to month-end dollar demand.
The rupee on Wednesday dropped by 73 paise to 61.20 in the late morning deals on persistent month-end dollar demand from importers on the back of strengthening in the US currency overseas.
Foreign institutional investors pumped in nearly $60 million (Rs 321.26 crore) into local equities, according to BSE provisional data.
A sluggish dollar movement in overseas markets and continued capital inflows restricted the rupee fall to a major extent, forex dealers said.
The rupee had strengthened by eight paise to close at 60.13 a dollar on Thursday, following firm local equities and fresh currency sales by exporters.
The rupee resumed lower at 54.73 per dollar as against the last closing level of 54.69 on the Interbank Foreign Exchange Market.
This is the first time since June 27 that the domestic currency has fallen below the 60 level.
The rupee's upward movement was aided by a good dose of dollar selling by exporters and some banks, amid a weak dollar overseas, said forex dealers.
The rupee had rose by a staggering 80 paise, its biggest single-day gain in last nine months, to close at 59.39 amid signs of strong fund inflows on Friday.
At the Interbank Foreign Exchange market, the local unit commenced strong at 54.40, which was also to be the day's high, as against previous close of 54.57.
At the Interbank Foreign Exchange market, the rupee resumed stable at its overnight closing level of 54.75 and immediately touched a low of 54.78.
Forex dealers said besides dollar gaining against other currencies in the global markets, a lower opening in the domestic equity market also, influenced the rupee.
The rupee fell to a record low of 59.9350 to the dollar, breaching past its all-time low of 58.98 on June 11.
Besides, dollar's weakness against some Asian currencies supported the local unit, forex dealers said.
Traders will watch out for any Reserve Bank of India intervention to prevent the rupee from weakening further.
The rupee had closed flat at 54.85 against the US dollar in Tuesday's trade amid RBI keeping key rates unchanged in the mid-quarter policy review.
While the rupee snapped a four-session downslide, it rupee could not cement intra-day gains as RBI kept short-term lending (repo) and cash reserve ratio unchanged, forex dealers said.
At the Interbank Foreign Exchange market, the local unit commenced weak at 54.52 and immediately touched a low of 54.75 on early hesitancy in domestic equities amid sustained dollar demand from importers.
The rupee had lost 21 paise to end at new 10-month low of 56.38 against the dollar on Thursday on fag-end spurt in dollar demand after RBI Governor D Subbarao painted a dim macroeconomic picture.
The rupee tumbled 19 paise to close at a fresh lifetime low of 77.93 against the US dollar on Friday as rising crude oil prices and unabated foreign capital outflows soured sentiment. A sell-off in equity markets and stronger greenback overseas also weighed on the domestic unit, forex traders said. At the interbank foreign exchange market, the local currency opened at 77.81 and witnessed an intra-day high of 77.79 and a low of 77.93 against the US dollar.
Appreciation of the dollar overseas amid a lower opening in the domestic equity market affected the rupee
On a weekly basis, the rupee fell by 1.36 per cent or 75 paise as dollar demand outweighed supply and stocks fell.
Even as rupee fell below 56-level against dollar intra-day, Chief Economic Adviser in the Finance Ministry Raghuram Rajan said, there is no need to panic, and RBI takes decisions on whether to intervene in forex markets or not to stabilise the local currency.
This is rupee's lowest closing since 55.45 on November 27, 2012.
The dollar index was up by 0.10 per cent against a basket of six major global rivals, ahead of a slew of data that could offer more evidence on whether an economic recovery is under way in the US.
Rupee had last ended at 54.81-level a dollar on April 5.
The dollar index was last trading up by 0.04 per cent against a basket of six major global rivals.
The dollar index was up by 0.04 per cent against a basket of six major global rivals.
The rupee had gained by 57 paise, or 1.04 per cent, in previous two days.
Forex dealers say dollar rose against the euro after the European Union cut its economic growth forecast.
Month-end dollar demand from importers mainly affected the rupee value against the dollar, a forex dealer said.
Sustained dollar sales by exporters and banks on behalf of their clients also boosted rupee sentiment even as the dollar index was marginally up in overseas markets, said traders.
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