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For the first time, the rupee declined to the low level of 80 against the US dollar in intra-day spot trading on Monday before ending the session 16 paise lower at 79.98 amid a surge in crude oil prices and unrelenting foreign fund outflows.
At the interbank forex market, the local unit opened at 79.76 against the greenback but lost ground to touch the psychological low mark of 80 against the American currency.
The local unit clawed back some lost ground and closed at 79.98, registering a fall of 16 paise over its previous close.
On Friday, the rupee rebounded from the near-80 levels to close higher by 17 paise at 79.82 against the US currency.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian rupee depreciated against the dollar on Monday after testing new lows as rising crude prices and persistent foreign fund outflows weighed on the currency.
The dollar was soft while most Asian and emerging market peers were stronger and capped weakness of the local unit.
The dollar index was weak in Monday afternoon trade in Asia after several Federal Reserve officials signalled they did not favour stepping up the rate hiking pace, Iyer said.
"Rupee continued to remain under pressure after retracing on Friday.
"Market participants remained cautious ahead of the Fed policy statement that will be released next week," Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal Financial Services, said.
"We expect the USD-INR (spot) to trade in the range of 79.79 and 80.20 in the short-term," Somaiya added.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.58 per cent down at 107.43.
Brent crude futures, the global oil benchmark, jumped 1.82 per cent to $102.98 per barrel.
On the domestic equity market front, the BSE Sensex ended 760.37 points or 1.41 per cent higher at 54,521.15, while the broader NSE Nifty climbed 229.30 points or 1.43 per cent to 16,278.50.
Foreign institutional investors remained net sellers in the capital market on Friday, offloading shares worth Rs 1,649.36 crore, as per exchange data.