The rupee was trading sharply lower by 54 paise at Rs 55.86 to the dollar, as equities across the globe plunged, fuelling fresh demand for the dollar.
The euro hit a 11 year against the yen, as fresh problems in Spain hit markets and currencies across the globe. The rupee is now trading at its lowest level since July 13.
Dealers are expecting a further weakness in the rupee due to strong demand for the dollar. Meanwhile, Indian equities dropped sharply in line with global markets. The Sensex was trading below the 17,000 levels.