The embattled rupee suffered yet another blow today -- falling by 18 paise to end at a fresh 16-month low of 67.51 against the US currency on heavy dollar purchases and sustained fund outflows from equities.
This is the lowest closing for the rupee since January 31, 2017, when it had ended at 67.87. A handful of cautious bias kept forex trading mood at extreme level despite a better start.
Currency traders stayed on the sidelines ahead of the critical inflation reading and the Karnataka election verdict, largely ignoring bearish dollar trend overseas. The home currency regained some upside traction in early trade amidst ongoing bearish trend.
Earlier in the day, the rupee resumed firm at 67.24 from weekend's close of 67.33 at the Interbank Foreign Exchange (Forex) market on bouts of dollar selling by exporters and banks.
It later picked up extra pace and touched a fresh intra-day high of 67.21 before taking a quick reversal in mid afternoon deals amid lack of any strong follow-through.
The local unit plummeted sharply to hit a fresh low of 67.63 towards the tail-end trade before concluding at 67.51, revealing a loss of 18 paise, or 0.27 per cent. The RBI, meanwhile, fixed the reference rate for the dollar at 67.3153 and for the euro at 80.5091.
Adding to the negative sentiments, country's industrial output grew by 4.4 per cent in March, the slowest in five months, due to a fall in capital goods production and deceleration in mining activity.
US trade policy and geopolitical uncertainties are the major negative factors playing out.
Widening nation's current-account and fiscal deficits against the grim backdrop of surging global crude prices have mainly hit the rupee, which has turned out to be the Asia's worst performing currency.
The Indian currency has been the worst performer this year so far, losing over 5.69 per cent value since January against the US dollar.
The rupee coming under pressure signals potential troubles that await Asia's third-largest economy, a forex dealer commented.
Oil prices steadied below 3-1/2 year highs as resistance emerged in Europe and Asia to US sanctions against major crude exporter Iran, while rising US drilling pointed to higher North American production.
Brent crude, an international benchmark, was trading at USD 77.36 a barrel in early Asian trade.
In the meantime, continuing downward trend, country's foreign exchange reserves fell by USD 1.426 billion to USD 418.940 billion in the week to May 4, due to decrease in foreign currency assets, RBI data showed.
Meanwhile, foreign investors and funds pulled out Rs 12,671 crore (USD 2 billion) from the Indian capital markets, in the last eight trading sessions, primarily due to surge in global crude prices and rise in yields of government securities here.
These developments follow an outflow of over Rs 15,500 crore from the capital markets (equity and debt) in April, the steepest in 16 months.
The yield on the benchmark debt maturing in 2028 shot up to 7.83 per cent from 7.73 per cent last week.
Meanwhile, domestic equity market managed to withstand initial volatility and ended almost flat with positive bias as wary investors shied away from making fresh bets ahead of Karnataka poll outcome on Tuesday.
Most Asian stocks were higher following US action last week but with one eye still on global trade.
Globally, the dollar headed for its fourth successive day of losses as broad risk appetite returned and investors questioned whether a recent rally by the greenback had run out of steam.
The dollar index, which measures the greenback's value against a basket of six major currencies was down at 92.19.
In the cross currency trade, the rupee dropped further against the pound sterling to settle at 91.75 per pound from 91.33 and slumped against the euro to end at 80.88 from 80.33.
It also remained weak against the Japanese yen to close at 61.64 per 100 yens as compared to 61.61 earlier.
Elsewhere, the rally in the European common currency extended for the second-straight day against the greenback despite lingering risk of another Italian election and ongoing political impasse.
The British pound bounced back from last week's 4-month lows against the US currency ahead of key macro data including the all-important wage growth data, and BoE's inflation report hearings scheduled on Tuesday.
In forward market today, premium for dollar declined owing to mild receiving from exporters.
The benchmark six-month forward premium payable in September moved down to 98.50-100 paise from 100-102 paise and the far-forward February 2019 contract edged lower to 233-235 paise from 234-236 paise previously.