The rupee depreciated 40 paise to an all-time low of 81.93 against the U.S. dollar in early trade on Wednesday as the strengthening of the American currency and risk-averse sentiment among investors weighed on the local unit.
Moreover, a negative trend in domestic equities and significant foreign fund outflows sapped investor appetite, forex traders said.
At the interbank foreign exchange, the rupee opened at 81.90 against the greenback, then fell to 81.93, registering a fall of 40 paise over its previous closing.
On Tuesday, the rupee consolidated in a narrow range and settled 14 paise higher at 81.53 against the dollar.
Weakness of Asian markets
The rupee opened weaker on Wednesday as the dollar resumed its upward momentum supported by hawkish Fed talk, said Sriram Iyer, Senior Research Analyst at Reliance Securities.
The local unit could track the weakness of the Asian and emerging market peers, Iyer said, adding that a delay in local bonds' inclusion for listing on a major global index this year could also cap gains.
"The Reserve Bank of India (RBI) may be present to curb volatility," Iyer noted.
The dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.40% to 114.55.
Meanwhile, investors are eying the RBI monetary policy meeting decision on Friday.
Global oil benchmark Brent crude futures fell 1.33% to $85.12 per barrel.
On the domestic equity market front, the 30-share BSE Sensex was trading 373.37 points or 0.65% lower at 56,734.15, while the broader NSE Nifty fell 108.20 points or 0.64% to 16,899.20.
Foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth ₹2,823.96 crore, as per exchange data.