Extending yesterday's loss, the Indian rupee today fell sharply by 37 paise to 61.87 against the US dollar in early trade on the Interbank Foreign Exchange market due to appreciation of the greenback overseas.
Increased demand for the dollar from importers too put pressure on the rupee.
Dealers attributed the rupee fall to dollar gains against the euro overseas but a higher opening in the domestic stock market limited the fall.
The Sensex rose 129.36 points, or 0.61 per cent, to trade at record high of 21,293.88 points in the morning trade, surpassing previous intra-day high of 21,206.77 reached on January 10, 2008.
The Indian rupee had lost 27 paise to close at Rs 61.50 against the dollar in yesterday's trade on heavy month-end demand from importers for the US currency, which strengthened overseas after the Federal Reserve indicated it may taper its stimulus programme earlier than expected.