The volatility in the domestic market was primarily due to the uncertainty surrounding the outcome of Karnataka's assembly election.
Moneycontrol News
The rupee on Tuesday weakened to a 16-month low of 68.11 against the US dollar amid heightened volatility in the domestic equity market and a strong show by the greenback overseas.
The last time the rupee ended above 68 to the dollar was in January 2017.
The volatility in the domestic market was primarily due to the uncertainty surrounding the outcome of Karnataka's assembly election.
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Despite having held its ground in early trade, the rupee started weakening once it became clear that a BJP victory in the state was not a foregone conclusion.
Other factors that contributed to the domestic currency's slide were the strong show by the dollar in overseas markets, and the more-than-expected consumer inflation and wholesale inflation numbers released on Monday.
India's consumer prices grew at 4.58 percent in April, around 15 basis points higher than what analysts had expected. Wholesale inflation came in at 3.18 percent.
The higher inflation numbers raised market participants' concerns that the Reserve Bank of India would be forced to increase interest rates earlier than they expected it to.
The dollar was trading in the green against most other Asian currencies. The Korean won, the Indonesian rupiah, the Singaporean dollar, the Thai baht and the Japanese yen were all trading 0.4-0.5 percent weaker against the American currency.
Meanwhile, the 10-year benchmark bond yield rose 8 basis points in Tuesday's session and ended at 7.90 percent. The benchmark yield has not closed above the 8-percent mark since November 2014.