The rupee dived 32 paise to touch a near one-month low of 73.89 against the US dollar on Thursday, following massive sell-offs in equities and concerns over continuous surge in COVID-19 cases. Besides, stronger dollar against key rivals currencies and robust outflows of foreign funds from domestic markets weighed on forex market sentiment.
At the interbank forex market, the Indian currency opened on a weak note at 73.82 and traded in a range of 73.75 and 73.96 a dollar during the session. The rupee finally closed at 73.89, registering a fall of 32 paise - its lowest closing level since August 26.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 94.42.
Brent crude futures, the global oil benchmark, fell 0.77 per cent to USD 41.45 per barrel.
"Dollar continues to gain as concerns about rising COVID-19 cases inducing a slowdown in the global economic recovery weigh on stock markets and emerging currencies, in turn benefiting the oversold dollar," said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.
Going ahead the strength in dollar index, foreign fund outflows and month end dollar demand could weigh on rupee, Vakil said.
On the domestic equity market front, the BSE benchmark Sensex crashed 1,114.82 points, or 2.96 per cent; while the NSE Nifty plunged 326.30 points, or 2.93 per cent.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,885.69 crore on Thursday, exchange data showed.
"Rupee came under pressure and fell sharply against the US dollar following sharp weakness in domestic equities and strength in the dollar against its major crosses. FIIs continued to pour out funds from equities and that too weighed on the overall market sentiment," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Meanwhile, India's COVID-19 caseload mounted to 57,32,518 with 86,508 people testing positive in a day. The death toll climbed to 91,149 with 1,129 people succumbing to the disease in a span of 24 hours, official data showed.