The rupee on Monday lost 34 paise to 54.35 in early trade at the Interbank Foreign Exchange, due to increased dollar demand from importers and appreciation of the US currency overseas.
Forex dealers said a weak opening in the domestic stock market also put pressure on the local currency.
Dollar strengthening against euro on reports that Cyprus would have to tax bank customers' deposits as part of an EU bailout deal, mainly pulled down the rupee, they added.
The domestic currency had gained 34 paise to close at a two-week high of 54.01 on Friday on robust capital inflows and heavy selling of the American currency by exporters.
Meanwhile, the BSE benchmark Sensex was down by 183.14 points, or 0.94%, at 19,244.42 in early trade on Monday.