Snapping its two-day winning streak, the rupee slumped by 15 paise to end at 77.40 (provisional) against the US dollar on Thursday, following risk-off sentiments amid increasing concerns over inflation globally.
Weak domestic equities, surging US dollar in overseas markets and persistent foreign fund outflows also weighed on the rupee which plunged to its all-time intra-day low of 77.63 against the US dollar, forex traders said.
At the interbank forex market, the rupee opened steeply lower at 77.52 against the greenback and moved in a range of 77.36 to 77.63 in the day trade. The rupee finally ended at 77.40, down by 15 paise over its previous close. The rupee had settled at 77.25 against the US dollar on Wednesday.
On May 9, the domestic unit had closed at the record low of 77.44 against the greenback.
Global equity markets went into a tailspin after higher-than-expected US retail inflation data for April fanned fears of aggressive rate hikes by the US Federal Reserve which could hamper growth, analysts said.
On the domestic equity market front, the BSE Sensex ended 1,158.08 points or 2.14 per cent lower at 52,930.31, while the broader NSE Nifty fell 359.10 points or 2.22 per cent to 15,808.
The dollar index, which gauges the greenback's strength against a basket of six currencies, surged 0.52 per cent to 104.39.
Foreign institutional investors remained net sellers in the capital market on Wednesday, as they offloaded shares worth ₹3,609.35 crore, as per stock exchange data.
Brent crude futures, the global oil benchmark, fell 2.32 per cent to $105.02 per barrel.
Consumer price index (CPI) and industrial output data are scheduled to be released later in the day.
According to sources, the Reserve Bank is likely to raise inflation projections in the Monetary Policy Committee (MPC) meeting next month and would also consider a rate hike to tame inflation, which is above its comfort level.
The MPC, headed by the RBI Governor, is scheduled to meet between June 6 and June 8. It has been mandated to keep retail inflation in the range of 2-6 per cent.
American brokerage Morgan Stanley on Wednesday cut its India growth estimate by 30 basis points for 2022-23 and 2023-24 on global headwinds and warned that macro stability indicators like inflation are set to "worsen" going ahead.
Tightening of policy rates by major central banks, including the RBI, would adversely impact demand in the next 6-8 months and slow down the recovery process, as per sources.
Besides the Reserve Bank of India (RBI), several central banks including the US Federal Reserve and Bank of England have hiked their benchmark lending rates to rein in inflation, which has been exacerbated by the Russia-Ukraine conflict.