The rupee plunged 12 paise to 85.27 against the dollar on Thursday, after declining 13 paise in the previous two sessions.
The rupee recorded its steepest single-day fall in past six months, sinking 53 paise to hit a new all-time intraday low of 85.80 against the US dollar during mid session on Friday as the unabated rise in the American bond yields boosted the greenback's appeal.
Positive domestic equity markets failed to resist foreign investors' selling spree as lower valuation of equities in other Asian peers turned more attractive. This resulted into a mass exit of foreign institutional investors from Indian equities, weighing down the rupee, according to analysts.
Besides, the rising crude oil prices pushed the rupee down further, they said.
At the interbank foreign exchange, the rupee opened weak at 85.31 and plunged to the lowest-ever level of 85.80 during mid session, recording its steepest single-day fall since March 22 this year when the unit settled 48 paise lower. Later in the day, the rupee traded with a loss of 42 paise at 85.69.
The earlier sharpest single-day fall of 68 paise was recorded on February 2, 2023.
The rupee plunged 12 paise to 85.27 against the dollar on Thursday, after declining 13 paise in the previous two sessions.
"The central bank holds USD 21 billion in short-side forward contracts set to mature in December and January. Market speculation suggests that the RBI has refrained from rolling over these maturing forwards, leading to a scarcity of dollars and an oversupply of rupees. Moreover, dollar liquidity in the market remains very low, amplifying the upward momentum in the pair. This imbalance has propelled the USD-INR pair towards 85.8075 levels," said Amit Pabari, MD of CR Forex Advisors.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.08 per cent at 107.98 amid soaring US Treasury yields with 10-year bond hovering around 4.50 per cent.
Brent crude, the global oil benchmark, rose 0.07 per cent to USD 73.31 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex was trading higher by 319.93 points, or 0.41 per cent at 78,792.41 points. The Nifty was up 89.60 points, or 0.38 per cent, at 23,839.80 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 2,376.67 crore, according to exchange data.