Extending losses for the second straight day, the rupee declined by 11 paise to close at more than 3-week low of 66.93 against the US dollar on persistent demand for the American currency from banks and importers amid sharp fall in equities.
Besides, sustained foreign capital outflows affected the rupee sentiment.
The domestic currency resumed lower at 66.85 as against yesterday's closing level of 66.82 at the Interbank Foreign Exchange (Forex) market and dropped further to 66.97 before ending at more than 3-week low of 66.93, showing a loss of 11 paise or 0.16 per cent.
The rupee had last ended at 67.09 on December 14, 2015. The local currency, which moved in a range of 66.67 and 66.97 during the day, has lost 33 paise, or 0.50 per cent in two days.
The dollar index was down by 0.48 per cent against the basket of six currencies in late afternoon trade.
Veracity Group CEO Pramit Brahmbhatt said, "Since opening trades, we saw buying in USD. Trading range for the spot USD/INR paid is expected to be within 66.80 to 67.20 range."
In a surprise move, China's central bank lowered the yuan's value against the US dollar, sending the domestic stock markets tumbling.
Meanwhile, the benchmark BSE Sensex ended lower by 554.5 points, or 2.18 per cent, to settle at 24,851.83.
Among global stock markets, trading in China was suspended for the rest of the day after the CSI 300 index tumbled more than seven per cent in early trade, triggering the market's circuit breaker for the second time this week.
Meanwhile, oil prices plunged to USD 33 a barrel today as crude extended losses on rising US energy stockpiles and China's weakening currency.
Besides, foreign investors sold shares worth Rs 242.48 crore yesterday, as per provisional data.
In forward market, premium for dollar continued to decline due to sustained receivings from exporters.
The benchmark six-month premium payable in June moved down to 197-199 paise from 200-202 paise and far forward December 2016 contract also went down to 407-409 paise as compared to 411-413 paise yesterday.
The RBI fixed the reference rate for the dollar at 66.9115 and for the euro at 72.3782.
In cross-currency trades, the rupee rebounded against the pound sterling to close at 97.52 from overnight finish of 97.92, but fell against the euro to settle at 72.73 from 71.82 earlier.
The local unit also moved down against the Japanese yen to end at 56.96 from Wednesday's level of 56.48 per 100 yen.
