At the Interbank Foreign Exchange (Forex) market, the local currency commenced lower at 54.82 a dollar from previous close of 54.50 and immediately touched a high of 54.76.
However, it started falling soon and logged an intra-day low of 55.17 before closing slightly better at one-month closing low of 55.07 -- a fall of 0.57 paise or 1.05 per cent.
Today's fall was the biggest in last two months after it had plunged by 80 paise or 1.49 per cent on November 5, 2012.
Continued dollar demand from importers and some banks on hopes of further rise in dollar value overseas put the rupee under pressure, said forex traders.
The rupee was unable to stage a turnaround even as FIIs pumped nearly Rs 1,200 crore in Indian stocks, they added.
The dollar index rose by 0.36 per cent ahead of December nonfarm payrolls data due later in the day, and after reports said minutes of the Federal Reserve's last meeting showed its members were considering an end to asset purchases this year.
"The thought of end to asset purchase came as a big surprise to the markets, which helped the dollar rebound drastically," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The Fed's bond buying plan pumps dollars in the market and hopes of an earlier-than-expected end to the plan would ease the supply of the US currency, experts said.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,"The rupee extended its weakening spree for the second straight session on sharp rise in dollar index and weaker tone of global equity markets."
Meanwhile, the BSE benchmark Sensex today erased initial losses to end 19 points higher on fag-end buying in oil & gas stocks triggered by hopes fuel price hikes. (MORE)
