The rupee on Tuesday lost 31 paise to 59.72 against the dollar in early trade on the Interbank Foreign Exchange due to appreciation of the US currency against euro overseas.
Increased month-end dollar demand from importers also put pressure on the rupee.
Dealers attributed the rupee's fall to dollar gains against the euro overseas and cautiousness ahead of the RBI monetary policy review today but a higher opening in the domestic stock market, restricted the fall.
The rupee had lost 37 paise, the most in a week, to close at Rs 59.41 on Monday against the dollar.
Meanwhile, the BSE benchmark Sensex rose by 27.31 points, or 0.13 per cent, at 19,620.57 in early trade on Tuesday.