The rupee plunged by 83 paise -- its biggest single-day loss in nearly seven months -- to close at an all-time low of 80.79 against the US dollar on Thursday after the US Federal Reserve's interest rate hike and its hawkish stance weighed on investor sentiments.
Forex traders said the US Fed's rate hike and escalation of geopolitical risk in Ukraine sapped risk appetite.
Moreover, the strength of the American currency in the overseas market, a muted trend in domestic equities, risk-off mood and firm crude oil prices weighed on the rupee.
At the interbank foreign exchange market, the local currency opened at 80.27, then fell further to an all-time intra-day low of 80.95 against the American currency.
It finally ended at 80.79, down 83 paise over its previous close of 79.96.
The rupee suffered its biggest single-day fall since February 24 when it had declined by 99 paise.
The US Fed hiked interest rates by 75 basis points to 3-3.25 per cent.
It was the third straight 75 basis points hike.
Fed Chair Jerome Powell reiterated the central bank's commitment to taming inflation.
Focus will be on Bank of Japan (BoJ) and Bank of England (BoE) monetary policies next, forex traders said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.38 per cent to 110.06.
Besides the hawkish US Fed stance, the US Dollar extended gains against its major crosses after Russian President Vladimir Putin announced partial military mobilisation.
"An aggressive Fed Chair Jerome Powell and Russian President Vladimir Putin's escalation of geopolitical risk in Ukraine turned on the green light for King Dollar against most currencies," said Dilip Parmar, Research Analyst, HDFC Securities.
Rupee along with other Asian peers tumbled to a record low.
"We believe the current downtrend in the rupee may continue for a while even after strong domestic fundamentals.
“The local currency will react to a stronger greenback but there could be outperformance among the regional currencies," Parmar said, adding that spot USD-INR now has resistance in the area of 81.25 to 81.40 while the previous top 80.12 would act as support.
Global oil benchmark Brent crude futures rose 0.36 per cent to $90.15 per barrel.
"Rupee fell to fresh all-time lows against the US dollar after the Fed raised rates by 75bps.
“Dollar rose to fresh 20-year high as the Fed signalled more large increases at its upcoming meetings," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
The Fed's new projections showed its policy rate rising to 4.4 per cent by the end of the year.
"Rupee was weighed down also as the Chinese yuan fell against the US dollar.
“Today yen witnessed volatility as the Bank of Japan intervened to curb sharp depreciation of the currency," Somaiya said.
Somaiya further added that focus will be on the BoE policy statement that is scheduled today.
"Expectation is that the central bank could raise rates by another 50bps.
“We expect the USDINR(Spot) to trade sideways and quote in the range of 80.20 and 80.80," he said.
On the domestic equity market front, the 30-share BSE Sensex dropped 337.06 points or 0.57 per cent to end at 59,119.72, while the broader NSE Nifty fell 88.55 points or 0.5 per cent to 17,629.80.
Foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth Rs 2,509.55 crore, as per exchange data.