The rupee recovered marginally after breaching the 55-level against the dollar, but was still down 41 paise on good demand for the American currency from banks and importers.
The dollar strengthened against other currencies as well in the overseas market.
The rupee resumed trading lower at 54.80 per dollar as against the last closing level of 54.49 at the Interbank Foreign Exchange (Forex) Market and dropped further to 55.05.
However, it recovered afterwards to 54.90 per dollar at 1100 hrs on mild selling of dollars.
In New York, the dollar had risen yesterday with markets subdued on US holiday.
Meanwhile, the BSE 30-stock index, Sensex, was steady at 17,467.03 at 1100hrs.