Heavy dollar demand from importers and weakness in local equities also pulled the rupee down against the Greenback.
The dollar index was quoting up by 0.10 per cent against a basket of six major global currencies. The American currency gained strength on signs of an improving US economy, besides the USD 10 billion cut in stimulus, forex traders say.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 60.24 a dollar from overnight close of 60.06, which was an over two-week high, but tried to recover as it surged to 60.20.
It, later, again fell back to a low of 60.57 on heavy month-end dollar demand from importers before concluding at 60.55, sharply down 49 paise or 0.82 per cent. This was its lowest value on closing since 60.65 on April 28, 2014.
Pramit Brahmbhatt, CEO, Veracity Group said: "Rupee slipped down to a three-month low, taking cues from strong dollar in global markets. Also, there was dollar demand from oil importers and state-run banks for corporate and defence- related payments. The trading range for the spot USD/INR pair is expected to be within 60.20 to 60.90."
The fiscal deficit in the first quarter of 2014-15 was Rs 2.97 lakh crore or 56.1 per cent of Budget Estimates for the whole financial year, government data showed today.
Meanwhile, the stock benchmark S&P BSE Sensex tumbled by 192.45 points, or 0.74 per cent. FII/FPIs today pulled out Rs 1,654.86 crore from stocks as per exchange-level data.
Yesterday, the US Fed reduced its asset purchase program from USD 35 billion/month to USD 25 billion/month -- the sixth consecutive USD 10 billion cut. The Fed noted that economic activity rebounded in Q22014, which was also testified by data. US GDP grew 4.0 per cent QoQ (annualized) in Q2 compared to 2.1 per cent contraction in Q1.