The rupee touched its record low of 69.10 a dollar in morning trade, an uncharted territory that typically gets treated by taking bets that the local currency would depreciate further.
The rupee collapsed to a lifetime low of 69.10 against the US dollar by plunging 49 paise in early trade on Thursday as rising crude oil prices deepened concerns about the country's current account deficit and inflation dynamics.
Consistent dollar demand from banks and importers, mainly oil refiners, following higher crude oil prices kept the rupee under pressure.
At the interbank foreign exchange market, the rupee opened at 68.87 a dollar against 68.61 previously and sank to 69.10 in morning deals, falling 49 paise.
Global oil prices have climbed after the US asked its allies to end all imports of Iranian oil by November. Concerns over supply disruptions in Libya and Canada also pushed prices higher.
The central bank has time and again signalled that it would not let the rupee cross its all-time low under normal circumstances. So, firms were apprehensive about taking a long position in rupee-dollar exchange rate.
"Now rupee has breached the 'triple top position' of 68.90, which would prompt the whole world to go long on dollars," said Abhishek Goenka, managing director at IFA Global.
'Triple top' refers to a position in a technical chart where prices have hit the level three times but had to retreat. This is the position where long traders book profit. Breaching this level means no view in the market and the price could swing any which way.
The immediate concern for the rupee is the sharp spike in oil prices. US oil prices reached their highest since 2014 to around $73 a barrel, from $66 a few months back, as the US clamped down on Iran oil and major oil-producing nations signalled they were in no mood to check the rise.
The tariff war led by the United States has also given rise to concerns of safe haven fears. This has led to outflows from emerging markets, including India. So far this year, about $7 billion of funds have flowed out from India.
Despite intervention by the Reserve Bank of India (RBI), the rupee should breach 70 shortly, said Goenka.
"Some importers are caught on the wrong foot, and some exporters, too, are feeling they have sold their dollars too early. But there is no panic as such," said Goenka.
According to Barclays Plc, the rupee might reach 72 a dollar. DBS also expects the rupee to cross 70.