Unnerved by mayhem in the equity markets and heightened global currency volatility, the rupee on Tuesday took a hefty knock by falling 17 paise to end at a fresh seven-week low of 64.24 against the US dollar ahead of the RBI monetary policy outcome tomorrow.
Frantic dollar demand from importers and banks in the midst of fresh foreign fund outflows predominantly weighed on the forex sentiment.
Stretching the slide for the fourth straight day, the home currency has depreciated by a staggering 66 paise in these four days.
The Indian currency hit a low of 64.40 intra-day before staging a recovery in line with local equities.
However, abundant forex reserves in the face of robust foreign direct and institutional investment flows along with a steep fall in global crude prices largely averted any major upset.
The rupee resumed the day with a gap-down at 64.35 from Monday's close of 64.07 at the Interbank Foreign Exchange (forex) market.
It kept descending associated with huge market volatility and hit a fresh low of 64.40 in mid-morning deals.
However, moving in tandem with the recovery trend in local equities, the home unit bounced back to cut short early steep losses and ended day at 64.24, depreciating by 17 paise, or 0.27 per cent - the level not seen since December 19 last year.
The RBI meanwhile fixed the reference rate for the dollar at 64.2723 and for the euro at 79.5241.
Most Asian currencies too lost further ground against the greenback largely impacted by the global bloodbath.
In the meantime, panic-driven capitulation continued on domestic bourses as investors heavily offloaded across the board along with stock futures following alarming drop in global equities as well as spillover from wobbly Asian markets.
Meanwhile, the RBI's two-day policy meet started today.
The MPC meeting outcome tomorrow is being keenly awaited by the currency traders and investors against the backdrop of post Budget scenario.
The government has allocated a bulk of its budgetary funds to the rural sector, despite failing to meet fiscal deficit target this year.
Besides, the Centre also projected a higher fiscal deficit of 3.5 per cent of the GDP for 2017-18, as against the target of 3.2 per cent and also raised net borrowing for the current fiscal steeply to Rs 4.79 lakh crore as against the estimate of Rs 3.5 lakh crore.
On the international commodity front, crude prices dropped by more than 1 per cent on Tuesday, extending the slide for the third day as casualties from the sell-off in equities mounted.
Brent crude futures were trading lower at $66.63 a barrel in early Asian trading.
Globally, the US dollar turned lower against other major currencies, as markets paused after the greenback's recent climb to nearly two-week highs following last week's upbeat US employment data.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 89.67 in early trade.
In cross-currency trades, the rupee strengthened against the pound sterling to settle at 89.60 per pound from 90.27 and also firmed up against the euro to finish at 79.68 as compared to 79.81 yesterday.
The local currency, however dropped further against the Japanese yen to end at 58.95 per yens from 58.32 earlier.
In forward market today, premium for dollar showed a weak to steady trend owing to lack of market moving factors.
The benchmark six-month forward premium payable in July softened to 142-143-1/2 paise from 142-144 paise, while the far-forward January 2019 contract ended steady at 281-283 paise.