The rupee erased early gains on Thursday and fell 11 paise to 56.02 a dollar on fresh demand for the American currency from banks and importers amid capital outflows from foreign funds.
The rupee was down despite the weakening of dollar against other currencies in the overseas forex markets.
The rupee resumed higher at 55.80 a dollar after yesterday's closing level of 55.91 at the Interbank Foreign Exchange (Forex) Market.
However, it failed to maintain gains and touched a low of 56.02 at 1040 hrs on renewed dollar demand from banks and importers.
The rupee moved between 55.80 and 56.02 a dollar during the morning deals.
In New York, the euro advanced against the US dollar on Wednesday after a news report said European Central Bank policy makers would consider buying distressed government bonds in a more currency-friendly way.
Meanwhile, the BSE 30-stock index, Sensex was slightly up by 7 points or 0.04% at 1050 hrs.