The rupee fell by 19 paise to 54.17 against the American currency in the late morning trade on month-end dollar demand from importers despite weak dollar overseas.
The rupee resumed slightly higher at 53.96 a dollar at the Interbank Foreign Exchange (Forex) Market.
However, it declined immediately to 54.23 before quoting at 54.17 1040 hrs.
Fresh month-end dollar demand from importers, mainly oil companies, affected the rupee's value against the dollar, a forex dealer said.
In the global market, the dollar declined on expectations that the damage by Superstorm Sandy will encourage the US Federal Reserve to maintain monetary stimulus.
Meanwhile, the Indian benchmark Sensex firmed up by 26 points, or 0.14 per cent, to 18,457.29 at 1050 hrs.