The rupee dropped past the 65 levels against the US dollar for the first time in two years, after the Peoples Bank of China devalued the Chinese Yuan. The Indian rupee was last trading at 65.01 against the dollar, a drop of 24 paise against Wednesday's close.

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Dealers say the Reserve Bank of India has not been intervening in the market. This may allow the rupee to fall and make Indian exports more competitive.

On Tuesday, the People's Bank of China reformed the exchange rate mechanism to better reflect market development in the exchange rate of the Chinese yuan against the US dollar.

The move surprised the market and prompted the lowest valuation of the yuan since October 2012. The central parity rate of the yuan against the US dollar weakened by 1,136 basis points on Tuesday and further dipped 1,008 basis points to 6.3306 on Wednesday.

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