The rupee had resumed higher at 55 per dollar against dollar at the Interbank Foreign Exchange (Forex) market on the back of persistent capital inflows from foreign funds into the equity market.
However, it dropped to 55.29 at 1050 hrs on sudden dollar demand from banks and importers. It hovered in a range of 55.02 and 55.29 during the morning deals.
Meanwhile, the Indian benchmark Sensex dropped by 62 points, or 0.36 per cent at 1100 hrs.
In New York market, the US dollar turned slightly lower late yesterday, erasing gains after Federal Reserve Chairman Ben Bernanke said that the central bank remains ready to take further action on monetary stimulus to support the economy.