The currency was last trading at 54.81, a drop of 31 paise against the dollar. The rupee is showing increasing signs of vulnerability, dropping at the slightest drop in equities.

Analysts are now concerned that should a risk averse environment set in for equities, with a slowdown in FII inflows, it could lead to severe damage to the rupee.

The rupee has been amongst the worst performing currencies during last year, despite record inflows from foreign funds. In fact, Indian markets were amongst the best performing in Asia and despite this the rupee failed to show any signs of recovery.

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