The rupee fell to a two-month low at 50.01/02 down 33 paise from its previous close of 49.67/68 to a dollar as commercial banks bought dollar to arbitrage in offshore non-deliverable forwards.
The US currency also gained from rising gold prices, which pushed domestic prices of the yellow metal above Rs15,500 per 10 gm in the early trade on the bullion market.
Gold surged to a new peak at Rs15,650 per 10 gm in opening trade in the national capital on brisk buying.
Triggered by safe-haven buying amidst a global economic downturn, gold prices in the overseas market also rose to their highest level in seven months, near $970 an ounce.
The rupee came off intraday lows in afternoon trade after some state-run banks sold dollars to prevent the Indian unit from dropping below 50-per-dollar mark. A recovery in the local stock market also helped.
State-run banks were seen selling dollars around Rs49.85 per dollar, possibly on behalf of the Reserve Bank of India, to protect the domestic unit from falling further.
Share prices pared losses to 0.3 per cent after falling as much as 1.2 per cent earlier.
The euro, however, bounced back from its lowest level in more than two months against the dollar.