MUMBAI: The Indian rupee on Wednesday suffered its biggest single-day drop in six months, losing 54 paise against the US dollar to end at 74.98 as investors turned cautious in view of massive selloffs in domestic equities and strengthening greenback against key rivals.
At the interbank foreign exchange market, the local currency opened at 74.63 and witnessed an intra-day high of 74.54 and a low of 74.99 against the US dollar in day trade. The local unit finally settled at 74.98 a dollar, down 54 paise over its previous close.
This was also the lowest closing for the rupee since April 23 this year. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.41 per cent higher at 94.36.
Meanwhile, Brent crude futures, the global oil benchmark, declined 0.55 per cent to USD 82.11 per barrel. On the domestic equity market front, the BSE Sensex ended 555.15 points or 0.93 per cent lower at 59,189.73, while the broader NSE Nifty declined 176.30 points or 0.99 per cent to 17,646.00.
"The rupee fell sharply primarily on the back of weakness in domestic and global equities and also as the dollar rose to a fresh one-year level. Market participants remain cautious also ahead of the important RBI policy statement that is scheduled to be released this Friday," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
Any concerns over higher inflation in India in the RBI policy meeting could also weigh on the rupee, he added.
Reserve Bank's rate-setting panel started its three-day deliberations on the next bi-monthly monetary policy on Wednesday amid rising global commodity prices and the need to contain inflation at home.
The decision of the six-member Monetary Policy Committee (MPC) would be announced on Friday by RBI Governor Shaktikanta Das on Friday.
Foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 1,915.08 crore, as per exchange data.
On the macro-economic front, international ratings agency Moody's on Tuesday upgraded India's rating outlook to 'stable' from 'negative', saying a recovery is underway in the Asia's third-largest economy and growth this fiscal will surpass the pre-pandemic rate.
Moody's Investors Service however kept India's sovereign rating at 'Baa3' -- which is the lowest investment grade, just a notch above junk status.