Dropping for the third consecutive day, the Indian rupee fell by 7 paise to close at 72.62 against the US dollar on Thursday amid concerns over surging coronavirus cases in India and some other parts of the world.
At the interbank forex market, the rupee opened lower at 72.68 a dollar, but recouped some of its losses during the session to close at 72.62, still down by 7 paise.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.14 per cent to 92.66.
Global oil benchmark Brent crude futures fell 1.40 per cent to USD 63.32 per barrel.
Analysts believe that volatility will stay in the market for sometime due to the uncertainty caused by the second wave of COVID-19 in India and a third wave in parts of Europe.
On the domestic equity market front, the BSE Sensex slumped over 740 points or 1.51 per cent to close at 48,440.12, while the broader NSE Nifty dived 224.50 points or 1.54 per cent to 14,324.90.
Foreign institutional investors were net sellers in the capital market on Wednesday as they sold shares worth Rs 1,951.90 crore, as per exchange data.
"Down trend continued in rupee for the third day in row following weakness in equities and increase in virus cases...With country battling a second wave of the pandemic and fund outflows ahead of financial year end, near-term risks are skewed to a higher dollar," said Dilip Parmar, Research Analyst, HDFC Securities.
Dollar index has been placed above key 200-day moving average resistance level at 92.63, with the dollar up against all G10 currencies amid risk-averse sentiments.
Spot USD-INR is expected to hold support of 72.26 and resist around 72.85, he added.
Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas, said, "Indian Rupee depreciated on strong dollar and risk aversion in the global markets. Market sentiments are hurt on concern that new wave of COVID-19 infections across Europe may push authorities to implement new lockdowns hampering economic recovery, fear over potential US tax hikes, escalating tension between west and China."
Additionally, Rupee slipped on concern over rising COVID-19 cases in India. However, sharp downside may be prevented on softening of crude oil prices. Rupee may trade in the range of 72.30 to 73.0 in next couple of sessions, he added.
