The local currency commenced lower at 54.03 a dollar on Monday's close of 53.86 at the Interbank Foreign Exchange market.
Later, it moved in a tight range of 54.00-54.22 before ending at 54.09, a fall of 23 paise, or 0.43 per cent.
In the last two sessions, it had gained 87 paise, or 1.60 per cent.
Forex dealers said, however, some capital inflows and weak dollar overseas cushioned rupee's fall to some extent.
"The rupee today completely followed the local equity markets' trend.
"Fears over the Italian election results which might hit the euro-zone crisis also affected the trading sentiment here," said Ashtosh Raina, chief dealer at HDFC Bank.
He added that forex market is expecting some positives on containing the fiscal deficit and borrowing side, which might boost
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