Hit by spike in dollar demand and negative cues from local stocks, the rupee on Wednesday plunged 65 paise in its biggest single-day drop in over six months to end at 61.49 against the greenback.
Continued strength in US economy lifted the American dollar after data on Tuesday showed US services sector activity hit an 8-1/2 year high last month and June factory orders surged. This affected the rupee sentiment, say dealers.
Besides, a global sell-off in equities hit Indian stocks dragging the rupee to over five-month lows, they said.
Dollar demand from importers on fears of rise in global oil prices amid worries that the Ukraine crisis could escalate, also impacted the rupee, they added.
At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced weak at 61.06 and immediately touched a high of 61.03.
As reports filtered in that Russia is building up troops on Ukraine border despite sanctions by US and Europe, emerging currencies and stocks were hit.
Importers and some banks bought dollars buying on hopes of further rise in this safe haven unit while forex dealers rushed to cover their short dollar positions, leading to deep losses for the rupee.
The rupee continued its down-slide and touched a low of 61.53, before concluding at 61.49 -- level not seen since March 5, 2014 when it had settled at 61.75. For the day, it logged a fall of 65 paise or 1.07% -- the biggest single-day drop since the 73 paise plunge on January 24, 2014.
The benchmark Sensex slumped 242.74 points, or 0.94%. FIIs had bought shares worth Rs 52.85 crore yesterday.
The dollar index was last trading up by 0.19% against a basket of six major global rivals.
Pramit Brahmbhatt, CEO, Veracity Group, said: "Rupee depreciated for the first time in this week and broke all the immediate supports. Corporate dollar demand was seen in the market which forced the rupee to fall near 5-month lows. Fall in local equities also dented the rupee sentiment."
The trading range for the spot rupee is expected to be within 61.00 to 62.00, he added.
In the forward market, premium fell back on renewed receipts by exporters.
The benchmark six-month premium payable in January closed lower at 246.5-248.5 paise from last close of 248-250 paise.
Far-forward contracts maturing in July, 2015 also moved down to 491-493 paise from 493-495 paise.
The Reserve Bank of India fixed the reference rate for dollar at 61.3360 and for the euro at 81.9630.
The rupee dipped further against the pound to 103.49 from 102.59 previously while reacted downwards to 60.07 per 100 Japanese yen from 59.25.
It also turned negative to end at 82.02 per euro from 81.45.