The rupee depreciated by as much as 212 paise or 3.21 per cent to 68.12 against the dollar on the interbank foreign exchange market today, following heavy dollar demand from banks and importers amidst a firming of the US currency overseas.
The rupee opened trading at 66.28 per dollar against the previous closing level of 66 per dollar and continued to lose ground to the US currency as the session progressed.
The Indian currency, which has already dropped 2.5 per cent in the last two trading sessions, was down at 67.24 a dollar at 1.12 pm.
With Brent crude prices in the international market rising to $114.82 per barrel on geopolitical worries, increased demand from importers for the US currency put pressure on the rupee.
Also, dealers said, the rupee weakened in afternoon trade as foreign institutional investors (FIIs) resorted to selling in domestic markets, which further raised dollar demand.
Forex dealers said the dollar's strength against the yen and the euro also affected market sentiment.
The BSE Sensex shed 680 points to close at 18206, while the Nifty closed down 213 points at 5337 after the Russian defence ministry said it had detected two ballistic ''objects'' fired towards the eastern Mediterranean.
The Indian currency dropped as much as 3.21 per cent to 68.12 per dollar while the yield on the benchmark 10-year Government of India bond rose 10 basis points to 8.52 per cent, up from 8.46 per cent on Monday.
The rupee had fallen by 30 paise to close at 66 against the US currency in the previous session, on Monday.