"Indian equities after the hike in credit policies reacted negatively and closed down by almost 2.5 per cent, which depreciated the rupee as dollar also traded firm against major currencies. Further fall in Rupee is expected due to demand in Dollar from oil importers," Alpari (Forex) India CEO Pramit Brahmbhatt said.
"The trading range for the USD/INR will be between 44.30- 44.80 tomorrow," he added.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened lower at 44.45/46 a dollar from previous close of 44.33/34.
Later, it moved in a range of 44.30-44.54 before concluding the day at 44.51/52.
Continued dollar demand from importers and some banks on the back of higher dollar overseas too weighed on the rupee.
The dollar index, consisting of six major currencies, was up by 0.10 per cent in European trade today.
The 30-shares Bombay Stock Exchange benchmark Sensex today crashed by over 463 points, or 2.44 per cent, to end at 18,534 extending losses for the seventh straight session.
In a bid to contain inflation, the Reserve Bank of India (RBI) today raised its short term lending (repo) rate and reverse repo rate by 50 basis points each to 7.25 per cent and 6.25 per cent, respectively, while lowering the economic growth projection to 8 per cent for the current fiscal.
It also increased bank saving rate by 50 basis points to 4 per cent.
The rupee premium for the forward dollar closed mixed.
The benchmark six-month forward dollar premium payable in October closed down at 158-160 paise from Monday`s close of 160-162 paise, while far-forward contracts maturing in April settled higher at 317-319 paise from 315-317 paise in the previous session.
The RBI has fixed the reference rate for the dollar at Rs 44.34 and the euro at Rs 65.75.
The rupee recovered against the pound sterling to end at Rs 73.38/40 from Monday`s close of Rs 74.02/04, while eased further against the euro to Rs 65.82/84 from Rs 65.80/82 yesterday.
It, also, dropped against the Japanese yen to Rs 55.11/13 per 100 yen from its last close of Rs 54.45/47.