During the session, the local unit witnessed an intra-day high of 73.25 and a low of 73.80 against the US dollar.
Besides, weak macro-economic data suggesting a long road to recovery also brought the rupee under pressure.
The output of eight core infrastructure sectors contracted for the fifth consecutive month, dropping 9.6 per cent in July, mainly due to a decline in production of steel, refinery products and cement.
The Centre’s fiscal deficit overshot the budget target for the current financial year within four months (April-July), mainly on account of the impact of lockdown on revenue collections.
According to the data released by the Controller General of Accounts (CGA), fiscal deficit during April-July was at 103.1 per cent of the annual target or at Rs 8,21,349 crore.
In more worries on the economy front, India’s GDP contracted by 23.9 per cent in the April-June quarter of the current fiscal, showed official data, released after the market hours.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.09 per cent higher at 92.45.
Brent crude futures, the global oil benchmark, rose 1.40 per cent to USD 46.45 per barrel.
“The Indian rupee depreciated against the US dollar amid concerns over escalating geopolitical tensions between India and China,” said Sriram Iyer, Senior Research Analyst, Reliance Securities.
In a fresh incident in eastern Ladakh, the Chinese army carried out “provocative military movements” to “unilaterally” change the status quo on the southern bank of Pangong Tso lake but the attempt was thwarted by the Indian troops, the Army said on Monday.
On the domestic equity market front, the BSE Sensex pared all its intra-day gains to close at 38,628.29, a massive drop of 839.02 points or 2.13 per cent. Similarly, the NSE Nifty dived 260.10 points or 2.23 per cent to 11,387.50.
“Given the direction of FPI and the possibility of FDI and ECBs to be positive, the rupee would tend to strengthen in the region of Rs 73.5-74/USD in the short run until economic activity recovers and imports increase,” Care Ratings said in a report.
During August, FPI flows have been very buoyant with nearly USD 6.8 billion being registered till last week with the equity flows dominating, it said.