The rupee declined by 12 paise to 55.74 against the dollar in early trade on Thursday at the Interbank Foreign Exchange market on month-end demand from oil importers for the American currency.
Besides increased dollar demand from importers, a lower opening in the domestic equity market put pressure on the rupee, forex dealers said.
The BSE benchmark Sensex fell by 79.47 points, or 0.45%, to 17,411.34 in early trade.
However, dollar's weakness against euro and other currencies overseas after US economic data capped rupee's losses, they added.
The rupee had gained 5 paise to end at 55.62 against the dollar on selling of the American currency by exporters in yesterday's session.