The rupee depreciated by as much as 63 paise to end at a record closing low of 81.62 vs the dollar on Monday after hitting a record low of 81.54 earlier in the session, as the greenback hit a fresh two-decade high against six other peers. Crude oil prices edged lower on Monday a barrel hit last week, yielding support to the currency.
The rupee has slumped two percent (nearly Rs 2) in four sessions.
Reuters reported that the Reserve Bank of India likely sold dollars to contain the decline. "The intervention by the RBI was confirmed to Reuters by four traders."
"The reason rupee is managing to cling on to 81.50 is the RBI," a private bank trader said. "But the supply of dollars by the RBI is getting easily absorbed."
The dollar index — which measures the American currency against the euro, the franc, the yen, the Canadian dollar, the pound and the krona — scaled a fresh 20-year high of 114.4. It was last up 0.5 percent at 113.5.
Brent crude futures slumped 1.5 percent to eight month low of $84.8 a barrel and WTI futures were 1.6 percent down near eight month low at $77.6 a barrel on the last count amid recession fears.
"We expect the USD-INR pair to remain volatile with support at 80.50 and its strong bullish momentum suggests one cannot rule out 82.50 levels," said Amit Pabari, Managing Director at CR Forex Advisors.
“Hawkish Fed outlook, political instability in China and sell-off in pound after the tax cut announcement is disturbing the overall market sentiment. This week, RBI will release its policy statement and this is likely to influence the rupee that is currently falling sharply against the US dollar,” said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Indian equity benchmarks Sensex and Nifty50 extended losses amid selling pressure across most sectors tracking negative global cues. Market ended at two-month lows on Monday.