The rupee fell by 12 paise to 55 against the American currency in the late morning trade on sustained dollar demand from banks and importers amid weakness in local equities.
The rupee resumed lower at 54.98 against dollar from Monday's closing level of 54.88. It dropped further to 55.08 before quoting at 55 at 1040 hrs.
The domestic currency hovered in a range of 54.95-55.08 during the morning deals.
Forex dealers attributed the decline in rupee's value for the fourth trading day in a row to weakness in local equities amid fresh capital outflows.
In New York, the dollar caught a bid against major currencies late in yesterday trading after stocks fell following comments from President Barack Obama that intensified worries about Washington's ability to keep the US economy from going over the so-called fiscal cliff.
The BSE benchmark Sensex by 165 points, or 0.89 per cent, to 18,454.06 at 1100 hrs.