Snapping its three-session winning streak, the Indian rupee tumbled 28 paise to close at 70.97 against the US dollar on Wednesday as continuing uncertainty over the US-China trade deal affected currency market sentiment worldwide.
However, robust foreign fund inflows and easing crude oil prices restricted the fall for the domestic unit, forex brokers said.
At the interbank foreign exchange market, the rupee opened at 70.80 and skidded to 71.01 against the greenback intra-day. The local unit finally settled at 70.97, down 28 paise over its previous close.
Rahul Gupta, Emkay Global Financial Services' head of currency, said the rupee-dollar spot market has been in a depreciating mode for the past three weeks as US and China have been hinting at a ‘phase one' trade deal anytime this month.
"Depreciation is getting capped as the market has started getting doubtful of the silence amid China's attempts to push the US to remove more tariffs," Gupta added.
The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.14 percent to 97.84.
Meanwhile, foreign institutional investors bought equities worth a net Rs 1,011.49 crore on Wednesday, provisional exchange data showed.
"Indian rupee under-performed the most amongst the Asian basket by plunging more than 30 paise against the dollar to trade at 71," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.
Sharma further said the "rupee did not react negatively towards a spike in crude prices and Dollar index in the recent past and perhaps today it has restored the parity with the dollar."
Brent futures, the global oil benchmark, slipped 0.30 percent to $62.77 per barrel. The 10-year government bond yield was at 6.49 percent.
On the domestic market front, the BSE Sensex rallied 221.55 points to close at its new lifetime high of 40,469.78. Similarly, the broader NSE Nifty briefly reclaimed the 12,000 level, before finishing at 11,966.05, showing a gain of 48.85 points, or 0.41 percent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.7283 and for rupee/euro at 78.7046. The reference rate for rupee/British pound was fixed at 91.1113 and for rupee/100 Japanese yen at 65.01.