The rupee tumbled to an intra-day low of 60.39 even as the RBI intervened in the fag-end to arrest the currency's fall.
Draft norms on banks' exposure to corporates with unhedged forex is said to have triggered the all-round selling.
The local currency is not much far from its all-time low of 60.72 hit last week. It has slumped 82 paise, or 1.4%, in the last three days.
"The rupee depreciated today as dollar strengthened against all major currencies. Also, equity market performance put some pressure on the domestic currency," said NS Venkatesh, treasury head, IDBI Bank.
The volatility is likely to continue for some more time.
"We think that once the dust settles, India's improving fiscal and external account balance, declining inflation, and efforts to attract investors would help the financing situation improve and pave the way for an appreciation of the exchange rate later this year," said Taimur Baig, chief economist, Deutsche Bank India.