The rupee on Monday declined by 42 paise to 72.08 against the US currency in early trade, due to strong dollar demand from banks and importers amid unabated foreign fund outflows.
Forex trader said the local unit came under pressure after the latest escalation of the US-China trade war.
Meanwhile, on Monday, China's currency slid to its lowest point in over 11 years amid concerns over global recession and the US trade war.
The onshore yuan fell to 7.1487 to the US dollar, its weakest point since early 2008, in Asian trading.
In Hong Kong, a weekend flare-up in violence during anti-government protests added to pressure on share prices.
The onshore yuan fell 0.6 percent in early trade to 7.15 per dollar, its weakest since February 2008 and its second-biggest one-day drop of the month. The offshore yuan fell to a record low of 7.1850, before regaining some ground to around 7.1595.
The Chinese authorities have allowed the tightly-managed yuan to fall some 3.6 percent so far this month as trade tensions between Beijing and Washington worsened, sparking fears of a global currency war. It was trading around 7.1419 by 0330 GMT.
At the Interbank Foreign Exchange, the rupee opened at 72.03 then fell to 72.08 against the US dollar, showing a decline of 42 paise over its previous closing.
The Indian rupee on Friday had closed at 71.66 against the US dollar.
Traders said strengthening of the greenback vis-a-vis other currencies overseas, and foreign fund outflows weighed on the local unit. However, higher opening in domestic equities. easing crude oil prices and the government's announcement of several measures to boost economy supported the domestic currency and restricted the fall.
The government on Friday announced a raft of measures, including rollback of enhanced super-rich tax on foreign and domestic equity investors, exemption of startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks, in efforts to boost economic growth from a five-year low.
To bolster consumption, the government also said that banks have decided to cut interest rates, a move that would lead to lower EMIs for home, auto and other loans.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,737.20 crore on Friday, provisional data with the exchanges showed.
The 30-share index was trading 166.48 points or 0.45 percent higher at 36,867.64 and the broader Nifty rose 170.95 points or 1.58 percent to 11,000.30.
The dollar index, which gauges the greenback's strength against a basket of six currencies, inched up 0.06 percent to 97.70.
Brent crude futures, the global oil benchmark, eased 0.91 percent to USD 58.80 per barrel.
The 10-year government bond yield was at 6.52 percent in morning trade.
--With agency inputs
Updated Date: Aug 26, 2019 10:39:48 IST