The Rupee dropped by 20 paise to 54.75 against the American currency in late morning trade on Thursday on fresh dollar demand from banks and importers despite persistent capital inflows in the equity market.

The rupee resumed lower at 54.67 per dollar as against the last closing level of 54.55 at the Interbank Foreign Exchange (Forex) Market.

It dropped further to a low of 54.83 before quoting 54.75 per dollar at 1050 hrs.

Fresh dollar demand from banks and importers mainly affected rupee value against the dollar, a forex dealer said.

In New York market, the US dollar pared losses yesterday amid reports that cut into optimism that Washington lawmakers are close to a deal to avoid going over the fiscal cliff.

The euro hit levels against the dollar last seen in April and notched a 17-month high against Japanese yen after a closely watched gauge of German business confidence rose more than expected in December.

Meanwhile, the benchmark BSE-30 index, Sensex, dropped by 115 points or 0.59% to 19,361.81 at 1100 hrs.