Rupee drops to 54.58/59 from its previous close of 54.2050/2150, tracking a global risk-off mood.
Asian shares down as investors worry about the fiscal crisis in the United States and the European economy's further deterioration, underpinning safe-haven currencies such as the yen and dollar.
Asian currencies trading mixed compared to the dollar.
Traders say losses in domestic shares adding to the bullish sentiment for the dollar. Shares down 0.7 percent.
Exporters, however, are expected to step up dollar sales and limit further sharp gains in the pair beyond the recent one-and-a-half-month low of 54.7850 touched on Tuesday.