The rupee pared initial gains to drop to a fresh all-time low of 71.79 against the US currency, falling 21 paise in late morning deals Wednesday on sudden bouts of dollar-buying by banks and importers.
Earlier, the rupee resumed higher at 71.43 against Tuesday's closing level of 71.58 a dollar at the interbank foreign exchange market in Mumbai.
The Indian unit was trading on a volatile note, moving in a wide range quoting between 71.40 and 71.79 during morning deals.
"Rupee's speculative demand is causing volatility amid crisis in the emerging market currencies and consistent rise in the crude oil prices," a dealer said.
The dollar strengthened against a basket of currencies overseas as the US economy continued to exhibit strength amid a lingering threat of escalation in the US-China trade conflict, leading to a fall in the domestic unit.
Meanwhile, the 30-share BSE Sensex is modestly lower by 29.83 points or 0.08 per cent at 38,128.09 at 1100 hrs.