The rupee on Monday fell by 37 paise, its biggest drop in two weeks, to close at 59.72 following month-end dollar demand from oil importers and some custodian banks coupled with capital outflows.
A weak dollar overseas failed to restrict the rupee's decline, a forex dealer said.
At the Interbank Foreign Exchange Market, the rupee opened at 59.30 to a dollar from Friday's close of 59.35 and climbed to a high of 59.29.
It later fell to a low of 59.74 before settling at a one-week low of 59.72, a drop of 37 paise, or 0.62 per cent.
Today's fall in absolute terms is the biggest drop since the rupee's 39 paise decline on July 8, when it plunged to record low of 61.21.
Forex dealers attributed the rupee's fall to heavy dollar demand from importers, mainly oil refiners, to meet month-end
"After opening on a strong note against the US dollar, the rupee was seen weakening in the later part," said Abhishek Goenka, founder & CEO, India Forex Advisors.
"It was seen trading range bound amid the absence of domestic and global cues.
However, the weakness seen during the day was mostly attributed to a weak start in the domestic equity markets."
The benchmark S&P BSE Sensex on Monday came off a two-month intra-day high to end just nine points up.
Foreign institutional investors pulled out a net Rs 406.02 crore from stocks today, as per provisional data with the bourses.
The dollar index was down by over 0.35 per cent against a basket of six major global rivals.
"The trading range for the spot USD/INR pair is expected to be within 59.20 to 60.00," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).