The decline came amid fresh dollar demand from importers and better-than-expected GDP growth in Germany and France.
The rupee opened lower at 61.54 a dollar from the previous close of 61.19 at the Interbank Foreign Exchange Market and touched a low of 61.56 on initial weakness in local stocks and dollar selling by exporters.
It recovered to a high of 61.29 on a smart rebound in local equities, only to fall again to a new closing low of 61.43, a drop of 24 paise or 0.39 per cent. The previous closing low was 61.30 on August 7.
Government data showed inflation based on the Wholesale Price Index shot up to a five-month high of 5.79 per cent from 4.86 per cent in June.
"The emerging scenario on inflation further complicates monetary policy making," said Kotak Mahindra Bank Chief Economist Indranil Pan.
The rupee was seen getting depreciated due to poor data and a strong recovery in the US dollar index, said Abhishek Goenka, founder & CEO of India Forex Advisors.
"Today's inflation number failed to paint an optimistic picture. It is seen weakening despite the measures announced by the Finance minister on Monday," he added.
Food article prices rose for the third straight month, while the declining value of rupee made oil imports costlier and pushed up fuel and power inflation to 11.31 per cent.
The dollar index, which strengthened in early deals overseas, was almost stable as the euro rebounded following Germany's GDP data.
The benchmark S&P BSE Sensex rallied further by 137.75 points or 0.72 per cent, while FIIs pumped in Rs 227.08 crore yesterday, as per provisional data with the stock exchanges.
"The dollar index traded strong today, which depreciated the rupee," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).