Mumbai: The rupee started 2017 on a weaker note and plummeted by a whopping 30 paise to 68.22 against the US dollar due to huge demand for the American currency.
Frantic investment outflows from the country against the backdrop of buoyant dollar sentiment largely kept home currency under immense pressure.
Healthy demand for the American unit from importers and corporates too weighed on the rupee alongside subdued trend in local equities, a forex dealer commented.
Indian bourses had a softer start to 2017 as equities were buffeted by concerns surrounding over the post demonetisation drive and upcoming Q3 corporate earnings outlook.
The domestic currency resumed on a weak note at 67.95 from last Friday’s closing level of 67.92 in an extremely quiet trade at the Interbank Foreign Exchange Market.
But it witnessed a sudden bout of volatility in mid-afternoon deals and drifted down to hit an intra-day low of 68.25 before ending at 68.22, revealing a steep loss of 30 paise, or 0.44 per cent.
Meanwhile, the rupee finished the year-2016 with a 2.68 percent annual fall, scripting its sixth consecutive years of decline against the greenback.
A large part of the outperformance was attributed to heavy capital outflows during the fag-end of the year, although it rebounded after plunging to historic lows.
Hedge funds and overseas investors have pulled out a massive USD 4 billion from the Indian capital market in December following rate hike by the US Federal Reserve.
In worldwide trade, the greenback rebounded from a two-week low against a basket of six major currencies on growing expectations that the US Federal Reserve will hike rates as many as three times this year.
The US dollar index was quoted marginally lower at 102.37 in late afternoon trade.
The RBI fixed the reference rate for the dollar at 68.0225 and for the euro at 71.5121.
In cross-currency trades, the rupee slumped further against the pound sterling to close at 83.91 from 83.48 and softened against the Japanese Yen to settle at 58.11 per 100 yens from 58.10 previously.
The home unit, however, recovered against the euro to finish at 71.50 from 71.64.
On the equity front, the benchmark Sensex dropped by 31.01 points to close at 26,595.45, while the broader Nifty lost over 6 points to settle at 8,179.50.
In the forward market, premium for dollar showed a mixed trend in the absence of any market moving factors.
The benchmark six-month premium for June was quoted at 147.5-149.5 paise from 147.5-149 paise, while the far-forward December 2017 contract moved down to 290.5-292.5 paise from 292-294 paise earlier.