The rupee dropped by 29 paise to 54.49 against the US currency in late morning trade on fresh dollar demand from banks and importers on the back of higher dollar in the overseas market.
The rupee resumed lower at 54.55 per dollar as against the last closing level of 54.20 per dollar at the Interbank Foreign Exchange (Forex) Market. It dropped further to 54.67 per dollar before quoting at 54.49 per dollar at 1040 hrs.
Renewed demand from banks and importers in view of firm dollar in the overseas market mainly affected the rupee value against the dollar, a forex dealer said.
In New York market, the dollar rose to a two-month high against a basket of major currencies yesterday as fears about going over the so-called fiscal cliff sunk US equity markets in the wake of President Barack Obama's election to a second term.
Meanwhile, the Indian benchmark Sensex dropped by 50 points in late morning trade.