The rupee fell sharply by 32 paise to 65.60 against the dollar on Tuesday as the greenback took on more strength overseas.
Forex dealers said the greenback hit a one and a half month high overseas after US manufacturing activity in September rose to its highest level in 13 years, bolstering expectations of an interest rate hike.
However, they said, a higher opening in domestic equities kept the losses in check.
The rupee had ended 22 paise higher at 65.28 against the dollar on Friday on sustained unwinding of the American currency by exporters.
Forex market was shut on Monday for Gandhi Jayanti.
The benchmark Sensex climbed 331.56 points, or 1.05 per cent, to 31,615.28 in the opening trade today.