Mumbai: 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.
Focus will be on Bank of Japan (BoJ) and Bank of England (BoE) monetary policies next, forex traders said.
Moreover, 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.
Meanwhile, equity benchmarks retreated for the second session on the trot on Thursday, in lockstep with a bearish trend overseas after the US Federal Reserve increased interest rates by 75 basis points and projected more rate hikes to quell scorching inflation.
The hawkish stance by US Fed and anticipated rate increases by other global central banks sparked a sell-off across emerging markets.
Falling for the second session, the 30-share BSE Sensex declined 337.06 points or 0.57 per cent to close at 59,119.72. During the day, it tanked 624 points or 1.04 per cent to 58,832.78.
Similarly, the NSE Nifty went lower by 88.55 points or 0.50 per cent to end at 17,629.80.
PowerGrid was the biggest loser in the Sensex pack, dropping 2.80 per cent, followed by HDFC Bank, Axis Bank, HDFC, Bajaj Finserv, ICICI Bank and UltraTech Cement.
On the other hand, Titan, Hindustan Unilever, Asian Paints, Maruti, ITC and Dr Reddy's were among the gainers, spurting as much as 2.73 per cent.
In the broader market, the BSE smallcap gauge climbed 0.47 per cent and the midcap jumped 0.32 per cent.
Among the BSE sectoral indices, bank dipped 1.44 per cent, followed by financial services (1.22 per cent), energy (0.42 per cent), realty (0.34 per cent), metal (0.32 per cent), oil & gas (0.24 per cent), healthcare (0.22 per cent) and teck (0.12 per cent).
FMCG, consumer discretionary, commodities, auto and industrials were among the gainers.
Meanwhile, the international oil benchmark Brent crude climbed 0.55 per cent to $90.32 per barrel.