This is the biggest one-day fall in the rupee since August 3, 2016
In line with domestic stock market, the rupee, on Friday, tumbled by 26 paise to end at 66.68, posting its biggest single-day drop in five weeks, on renewed demand for the American currency from banks and importers.
A massive sell-offs in domestic equities tracking global markets, following the European Central Bank's decision to keep its monetary policy stance unchanged, mainly weighed heavily on the rupee sentiment.
This is the biggest one-day fall in the rupee since August 3, 2016.
Dealers avoided taking long positions ahead of key macro data release including the consumer price index (CPI) inflation data for August and Index of Industrial Production (IIP) for July on Monday, a forex trader said.
Moreover, market sentiment will be influenced by crucial Federal Reserve's two-day meet next week and the BOJ's unveiling the results of a comprehensive policy review it promised in July, they said.
The domestic unit resumed lower at 66.57 from Thursday's closing of 66.42 at the Interbank Foreign Exchange (Forex) market on the back of aggressive dollar buying initiated by domestic banks and importers.
It was later stuck in a tight range after making a fast descending movement to hit a fresh intra-day low of 66.76 before ending at 66.68, revealing a sharp loss of 26 paise, or 0.39 per cent.
The rupee briefly touched a high of 66.5275 during the day.
Meanwhile, the dollar recovered against the yen, after North Korea's latest nuclear test pulled cash into the perceived safety of the Japanese currency.
In other currency markets, the euro maintained its strong upward trend against other major currencies after the ECB kept its monetary policy unchanged on Thursday.
The RBI fixed the reference rate for the dollar at 66.5462 and euro at 75.0242.
In cross-currency trades, the rupee fell back modestly against the pound sterling to settle at 88.78 from 88.75 and dropped further against the euro to finish at 75.15 from 74.97.
But the local currency recovered sharply against the Japanese yen to close at 64.96 from 65.38 per 100 yens earlier.
In the forward market, premium for dollar remained under pressure owing to consistent receiving by exporters.
The benchmark six-month premium for February slumped to 176-178 paise from 180.5-182.5 paise and the forward August 2017 contract also drifted to 364-366 paise from 370.5-372.5 paise yesterday.
Meanwhile, domestic equities once against turned volatile and succumbed to profit-taking after the benchmark indices closed at their highest level in 17-months yesterday even as global market sentiment took a hit after ECB left monetary policy stance unchanged.
The flagship Sensex tumbled 248.03 points to end at 28,797.25, while broader Nifty slumped 85.80 points to close at 8,866.70.
Crude prices retreated after a sharp overnight rally as traders reacted cautiously and took profits, though output freeze speculations continued to weigh on trade ahead of the OPEC meeting in Algeria held 26-28 September and also underpinned by strong crude imports data from China.
A sharp fall in US crude stocks lifted oil prices by over 4 per cent on Thursday.
Photograph: Reuters