The rupee on Friday lost 21 paise to 54.98 against the dollar in early trade on the Interbank Foreign Exchange due to appreciation of the US currency against euro overseas.
Increased demand for the dollar from importers also put pressure on the rupee.
Dealers attributed the rupee’s fall to dollar gains against the euro and yen overseas but a higher opening in the domestic stock market capped the fall.
The rupee had closed just one paise higher at 54.77 a dollar in yesterday’s trade.
Meanwhile, the BSE benchmark Sensex rose by 54.25 points, or 0.27 per cent, at 20,301.58 in early trade on Friday.