The rupee has recovered marginally from initial losses but is still down 43 paise at 55.40 a dollar on persistent demand for the American currency from banks and importers today.
Besides, the dollar also made gains against other currencies, especially the euro in the overseas market.
The rupee resumed lower at 55.45 per dollar as against the last closing level of 54.97 per dollar at the Interbank Foreign Exchange (Forex) Market and dropped further to 55.52 per dollar on good dollar demand.
However, it recovered marginally to 55.40 per dollar at 1040 hrs due to mild selling of dollars.
Dealers said the European Central Bank's cutting key interest rate to a record low of 0.75% increased the demand for the dollar from importers, particularly oil companies, weighing on the rupee value.
In New York, the dollar gained over a per cent against the euro yesterday, following the European Central Bank cut interest rates.
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Similar steps to stimulate sagging economies were also taken by the People's Bank of China and the Bank of England.
Meanwhile, the BSE 30-stock index, Sensex, dropped by 93 points or 0.53% in the late morning trade.