The rupee opened sharply lower at 56.18 per dollar as against the previous closing level of 55.96 at the Interbank Foreign Exchange (Forex) market.
It hovered in a range of 56.00 and 56.18 in late morning deals and was quoting at 56.16 per dollar at 1100 hours, down 20 paise over its last close.
"Heavy month-end dollar demand from importers and banks, coupled with weak equities led to rupee's bearishness," dealers said.
In the international market, the US dollar fell against the Japanese yen in the early trade following a rise in the Japanese bond-market.
Meanwhile, the BSE-30 share barometer Sensex was trading lower by 19.35 points, or 0.10 per cent, quoting 20,141.47 at 1105 hours.