The Indian unit dropped further by 23 paise to 65.50 in late-morning deals following sustained dollar demand from banks and importers despite a weak US currency overseas.
The Indian unit opened lower at 65.39 as against last Friday's level of 65.27 at the Interbank Foreign Exchange (forex) market.
It hovered in the range of 65.36 to 65.51 during the morning deals before quoting 65.50 at 1030 hours.
The dollar index is currently down by 0.06 per cent at 96.77 against a basket of six currencies.
"The US dollar-rupee pair should trade in a range of 65.15-65.55 per dollar today. There will probably be good interest from local government banks to buy dollar on dips to the lower end of the range," a forex dealer said.
"Exporters will use the upmove in the dollar as an opportunity to sell dollar and hedge their future dollar receivables," he added.
Oil prices fell in early Asian trade as analysts expected weaker demand from China in upcoming months.
The US dollar edged down in early Asian trade as investors' appetite for risk dried up against a background of downbeat Chinese factory surveys.
Meanwhile, the benchmark BSE Sensex was trading lower by 88 points, or 0.33 per cent, at 26,568.73 at 1035 hours.
