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The rupee tumbled by 32 paise to end at 74.37 against the US currency on Wednesday, weighed down by a muted trend in domestic equities and a strong greenback in the overseas market.
Besides, persistent foreign fund outflows also put pressure on the domestic unit, forex dealers said.
At the interbank foreign exchange market, the local currency opened at 74.11 and witnessed a high of 74.06 and a low of 74.42 against the US dollar in day trade.
The local unit finally settled at 74.37 a dollar, down 32 paise over its previous close of 74.05.
According to Emkay Global Financial Services, "Inflationary concerns are increasing globally, and as we proceed with the week, IPO related inflows may dry out, keeping USD/INR spot afloat".
The key catalyst for the forex market is US inflation data. A lower-than-expected CPI figure will reflect 'transitory' factors, however, higher-than-expected data or a figure in line with market consensus will induce the Fed to accelerate the pace of asset purchases, it said, adding that "we expect USD/INR spot to trade between 73.75-74.50".
On the domestic equity market front, the BSE Sensex ended 80.63 points or 0.13 per cent lower at 60,352.82, while the broader NSE Nifty declined 27.05 points or 0.15 per cent to 18,017.20.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.19 per cent up at 94.13.
Foreign institutional investors were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 469.50 crore, according to exchange data.
Meanwhile, Brent crude futures, the global oil benchmark, declined by 0.06 per cent to $84.73 per barrel.
"The rupee after appreciating in the last few sessions was weighed down following profit booking in domestic equities and also as the dollar rose against its major crosses," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
On the domestic front, fund flows in recent IPOs remained tepid, and that too disturbed the overall market sentiment.
Market participants remained cautious ahead of the important inflation number that will be released from the US. The expectation is that the number could remain unchanged in October compared to the previous month, and that could keep the volatility in check for the greenback, Somaiyaa said.
"We expect the USD/INR (Spot) to remain sideways and quote in the range of 74.20 and 74.80," he added.
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