Mumbai: The rupee today nosedived 39 paise to hit a near one-month low of 68.38 against the US dollar as escalating trade threats between the world's two biggest economies continued to spiral.
Increasing prospects for a full-blown US-China trade war triggered a risk-off atmosphere in many global currency markets after US President Donald Trump ordered to impose another round of tariffs on more Chinese goods, prompting China to retaliate.
World stocks too reacted negatively with significant falls in Asia that carried through to Europe.
Domestic forex market sentiment succumbed to bouts of pressure on revival of fresh global trade war fears and concerns about possibility that the adverse US trade policy will have a substantial impact on the Indian economy.
The rapid surge in global crude oil prices has already had an adverse impact on the country's fiscal arithmetic.
The home currency crumbled to hit a intra-day low of 68.39 in later afternoon on panic dollar buying.
On the energy front, crude prices dropped, weighed down by expectations that producer group OPEC and key ally Russia will gradually increase output.
Brent crude futures, an international benchmark, is trading up at USD 74.39 a barrel, in early Asian trade.
Bond markets, however, staged rebound and the 10-year benchmark bond yield finished a tad lower at 7.86 per cent as compared to 7.88 per cent.
Earlier, the rupee opened almost flat at 67.98 from overnight close of 67.99 at the interbank foreign exchange (forex) market.
But, later suffering in a deeper risk-off reaction, the local unit descended sharply to hit a low of 68.39 before ending at 68.38, showing a steep loss of 39 paise, or 0.57 per cent.
This is the lowest closing for the rupee since May 23.
The RBI, meanwhile, fixed the reference rate for the dollar at 68.1511 and for the euro at 79.1575.
The dollar index, which measures the greenback's value against basket of six major currencies, was up at 94.79.
The greenback rose to the day's highs against the currency basket and pared back some losses against the safe haven yen as heightened trade tensions between the U S and China soured risk appetite.
In the cross currency trade, the rupee, however, maintained its bullishness against the pound sterling and settled at 89.96 per pound from 90.09 yesterday.
The home unit, slipped against the euro to finish at 78.97 from 78.96 and also fell against the Japanese yen to end at 62.27 per 100 yens as compared to 61.55 earlier.
Elsewhere, the British pound plummeted to fresh 7-month low against the greenback, extending the fall for the second consecutive session weighed down by the UK Prime Minister Theresa May's loss of a vote on her Brexit legislation in the House of Lords amid fading BoE rate hike prospects.
The common currency euro also drifted to near 2018 lows against the US dollar on the back of sluggish eurozone macro data and also impacted by the US-led trade war concerns.
In forward market today, premium for dollar showed a steady to firm trend owing to lack of market moving factors.
The benchmark six-month forward premium payable in October was unchanged at 104-106 paise, while the far-forward April 2019 contract edged up to 248-250 paise from 247-249 paise on Monday. (PTI)