The rupee pared initial gains to drop 6 paise, hitting a fresh six-month low at 65.55 in late morning trade against the American currency on sudden bouts of dollar demand from importers.
The rupee opened higher at 65.44 from yesterday's closing level at 65.49 per dollar at the interbank foreign exchange here.
The domestic unit witnessed volatility and hovered between a high of 65.41 and a low 65.5550 during morning deals, it was trading at 65.55 at 1020 hrs.
Rising crude prices on the back of widening trade deficit concerns continue to linger on the rupee, a dealer said.
Crude oil rose amid worries of a high risk of disruptions to supply, especially in the Middle East.
Brent crude oil futures were at USD 71.80 per barrel, up 38 cents, or 0.5 per cent, from their last close.
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Meanwhile, the US dollar steadied against basket of currencies in early Asian trade.
The 30-share BSE Sensex trading higher by 96.31 points or 0.28 per cent at 34,401.74 at 1040 hrs.