Dollar demand from banks and importers further weakened the rupee to 54.21 against the dollar in the first session of the currency market trade on Tuesday.
At 1.16 p.m., the rupee was trading at 53.17 to the dollar.
The domestic unit had gained 30 paise to close at an over one-week high of 53.87 on Monday on the back of sustained dollar selling by exporters.
The local currency opened lower at 54.03 at the Interbank Foreign Exchange market today on weaker euro and subdued domestic and Asian equity markets.
The euro fell to a seven-week low against the dollar today due to the political gridlock in Italy threatening the country's economic reforms and leading to further fears on the euro zone debt.
In the first-half session trade, the Indian currency moved in the 54 to 54.21 range.
