Importers and some banks bought dollars and short-sellers covered their positions on hopes of further hike in the dollar value after US Fed recently trimmed its monthly economic stimulus by USD 10 billion. The dollar too gained against most peers as the American economy grows stronger.
A steep fall in local indices after a global sell-off also weighed down on the rupee. The benchmark Sensex today slumped over 414 points, or 1.60 per cent, to a 3-week low.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced weak at 60.75 a dollar from last close of 60.55 and immediately touched a high of 60.69.
However, it later tumbled to a low of 61.19 before ending at 61.18, showing a fall of 63 paise or 1.04 per cent. This is its weakest closing since 61.34 on March 20. In absolute term, this 63-paise fall is the biggest since January 24 (73 paise).
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Yesterday, it has plunged by 49 paise or 0.82 per cent.
On the drop in markets, RBI Governor Raghuram Rajan in Delhi said: "We are not immune to what is happening world markets."
For the week, the rupee slumped 108 paise -- its worst drop since 112-paise plunge in the week ending January 24.
Pramit Brahmbhatt, CEO, Veracity Group said: "Rupee fell taking cues from dollar which traded strong. A global sell-off hammered the market which further depreciated the rupee...Some intervention was suspected from RBI through state-run banks."