The Indian rupee plunged to a new low of 81.67 against the US dollar while the Sensex, the stock market’s bellwether index, shed 953.70 points amid fears of a prolonged rising inflation, successive key policy rate hikes and the looming recession in advanced economies.

The rupee opened Monday below the 81-mark at 81.53 to the greenback and hit a day’s low of 81.67 against the American currency. It closed the day 63 paise lower at 81.62, weakening from Friday’s close of 80.99. In fact, the rupee had breached the 81-mark against the greenback on Friday.

The Reserve Bank of India (RBI) intervened aggressively in the market but couldn’t stop the slide of the rupee, according to some analysts.

The greenback strengthened against a basket of currencies with the Federal Reserve indicating more rate hikes in the wake of rising inflation even if it slowed down the economy. The Dollar Index vaulted to a new 20-year high of 114.53 in early trades on Monday. The pound fell sharply against the US dollar after the Bank of England decided to rule out an emergency rise in interest rates.

In India, there is additional fear that the outflow of foreign funds may continue, thus making the rupee and the stock market vulnerable. Several analysts said the rupee will continue to be vulnerable in the medium term amid flight of capital in emerging markets.

The 10-year government bond yield ended at 7.359%, after closing at a two-month high of 7.393% on Friday.

The focus will now shift to RBI’s policy announcement on 30 September even as the market expects the central bank to hike repo rate by 50 basis points. Analysts see the rupee moving in the range between 80.50-81 to a dollar before the RBI’s policy announcement.