The rupee fell by another 27 paise to trade at fresh two-year low of 65.81 against the dollar on Friday on sustained capital outflows by foreign funds even as the US currency weakened overseas.
Besides, strong demand for dollar from importers and banks and a lower opening in the domestic equity market weighed on the local currency, forex dealers said.
The rupee dropped even as dollar weakened against other major global currencies overseas amid mounting global economic slowdown worries.
The rupee had lost 27 paise to close at a new two-year low of 65.54 against the US dollar on Thursday following renewed demand for the American currency from banks and importers.
Meanwhile, the benchmark BSE Sensex plunged by 476.38 points, or 1.72 per cent, to 27,131.44 in early trade.