A wider trade deficit, along with outflow of foreign funds and global cues weakened the Indian rupee to a fresh record low during the morning session on Thursday.
However, at 10.45 am, the rupee recovered to 70.23 after it had plunged to 70.32-33 -- the lowest ever mark -- against the greenback on the back of an apparent intervention by the Reserve Bank of India (RBI).
"While we celebrated our 72nd Independence Day and our foreign exchange and interest rates markets were shut, a lot transpired in global markets. This time it was not the Turkish soup, but rather the Chinese Dragon. China is a long-term theme for EMs... Chinese currency dropped to a fresh low for 2018 as 6.95 to a dollar on the CNH," said Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities.
"However, the technical trend remains firmly bullish for USDINR. Correction is welcome... Nevertheless, a close below 69 on spot would impair the bullish USD view. Resistance is around 70.50 and then 71 and 71.50-72 levels on spot."
On Tuesday morning, the Indian currency had plunged to 70.08 -- its previous lowest ever mark -- against the greenback.
At the end of the intra-bank trade session on Tuesday, the Indian rupee strengthened by four paise at 69.90 against the dollar, compared to Monday's close of 69.94 per greenback.
As per the data released by the Ministry of Commerce and Industry on Tuesday, India's merchandise trade deficit widened to $18.02 billion during last month as against $11.45 billion in the corresponding period the previous year.
"India's trade deficit has widened sharply... This is a trigger for today's fall in the rupee. Even though the Turkish Lira has recovered, the dollar index continues to move higher. The rupee is expected to remain under pressure in the next few sessions," Rushabh Maru, Research Analyst, Anand Rathi Shares and Stock Brokers, told IANS.
"Even if the rupee appreciates, the appreciation won't sustain for long due to global uncertainty."
Recent US sanctions and tariffs on Turkey has had an impact on its and other emerging market currencies over fears of further global protectionist measures.
Apart from global cues, the outflow of foreign funds from the Indian equity and bond markets has had an adverse impact on the rupee.
Investment-wise on Tuesday -- the previous trade session -- provisional data with exchanges showed that foreign institutional investors sold scrip worth Rs 378.84 crore.
Even the Indian equity market was subdued as the rupee plunged.
The Sensitive Index (Sensex) of the BSE, which had closed at 37,852 points on Tuesday, opened lower at 37,796.01 points.
At the National Stock Exchange (NSE), the broader Nifty50, quoted at 11,390.35 points, down by 44.75 points or 0.39 per cent just after opening.
The markets remained closed on Wednesday for the Independence Day celebrations.