The rupee on Monday plunged by a hefty 52 paise to slip below 54-mark for the first time in five weeks on month-end dollar demand from importers and corporates, amid the much-awaited RBI monetary policy review on Tuesday.
A firm dollar overseas, renewed capital outflows and late weakness in local stocks also weighed down on rupee which closed at 54.08.
The rupee commenced sluggish at 53.88 a dollar from last Friday's close of 53.56 but tried to chart out a recovery in the initial stages as it hit a high of 53.76.
Heavy demand for dollars from importers, mostly oil firms to meet month-end requirements amid some short-coverings by exporters, however, forced rupee to reverse early gains and fall below the 54-mark.
Bankers said rupee also wilted due to hopes of policy rate cut or announcement of Open Market Operations (OMO) on Tuesday.
The dollar index was up by 0.27 per cent against a basket of six major rivals. These factors kept pressure on rupee throughout the rest of session with the currency touching a low of 54.09. The rupee finally finished near day's lowest levels at 54.08, a fall of 52 paise or 0.97 per cent.
"Rupee managed to cross 54-bar as weakness in equity markets and currencies prompted a short-covering push in dollar," said Anindya Banerjee, Currency Analyst, Kotak Securities.
The rupee had last settled at 54.38 on September 20, 2012.
The Indian stock market benchmark Sensex, which was up by over 118 points in morning trade, surrendered most initial gains to close a mere 10.48 points higher. FIIs sold stocks worth Rs 77 crore today, as per provisional data.