Mumbai: The rupee today tumbled by over 25 paise to close at 68.21 against the US dollar on renewed worries over fall in the country's economic growth coupled with concerns regarding quarterly earnings due from this week.
Besides, Fed rate hike speculation triggered by stellar jobs report and also frantic dollar demand from importers and corporates added pressure on the local currency.
Sustained capital outflows and dollar's strength against some other currencies overseas also weighed on the local unit, forex dealers said.
Forex market sentiment turned little shaky following lower economic growth projections stoked worries about its ability to meet its year-end growth target.
The Central Statistics Office (CSO) last Friday projected India's GDP growth to slow down to 7.1 per cent, from 7.6 per cent in 2015-16 even without taking into account of demonetisation impact.
Traders were also worried that cash crunch arising out of demonetisation is expected to paralyse economic activity in the short-term and likely to pull down growth.
Meanwhile, Finance Minister Arun Jaitley today said both direct and indirect tax collections have shown robust increase during the April-December period, indicating uptick in economic activity including manufacturing, dismissing concerns of slowdown due to demonetisation.
Domestic bourses remained under pressure for the third straight session as concerns mount over risks for investors ahead of December corporate earnings against the backdrop of government's recent move to ban high-value notes.
The home unit opened sharply lower at 68.16 from last Friday's closing value of 67.96 at the Interbank Foreign Exchange market and drifted further to hit an intra-day low of 68.25 in late afternoon deals due to heavy dollar demand.
Though, it made a failed attempt to bounce back towards the fag-end trade before ending at 68.21, revealing a hefty loss of 25 paise, or 0.37 per cent.
In worldwide trade, the greenback edged higher against a basket of world currencies on the back of encouraging US jobs report and also growing prospect for a series of Fed rate hikes this year amid optimism over the health of US economy.
The British Pound fell sharply roiled by weekend comments from UK Prime Minister rekindled worries about a hard Brexit.
The US dollar index was trading firmly higher at 102.31 in late afternoon deals.
The RBI fixed the reference rate for the dollar at 68.1863 and for the euro at 71.8206. .