The rupee depreciated by 29 paise to 55.63 against the dollar in early trade on Tuesday, extending losses for the third day in a row on the Interbank Foreign Exchange on continued demand 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.
They, however, added that euro and yen's rise against the dollar in the overseas markets capped rupee's losses.
The rupee had lost 6 paise to end at 55.34 against the dollar in Monday's volatile session.
Meanwhile, the BSE benchmark Sensex fell by 20.43 points, or 0.12%, to 17,613.02.