The rupee today plunged to a new record low of 73.40 to the dollar, dropping 0.4 per cent.

The currency had closed at 72.91 against the US dollar on Monday and today's sharp fall makes it a new historic low against the dollar.

Rising crude prices, thanks to sanctions on Iran, have been one of the prime reasons for the sharp drop in the rupee.

Sustained dollar demand may be coming from Foreign Portfolio Investors, who have been selling massive amounts in the Indian markets in the cash segment.

Some analysts believe that we may see levels of 75 to the dollar in the coming days. The falling rupee may also push the Reserve Bank of India to hike interest rates on Friday in its Monetary Policy Review.

There are now fears that there would be two back to back interest rate hikes from the country's central bank to curb the falling rupee. One rate hike is likely to come on Oct 5, 2018, and the other in December. The rupee has followed the Indonesian Rupiah, which also plunged to a new record low against the dollar.

Meanwhile, Indian benchmark indices opened the day lower, due to the falling rupee. The Sensex was down 233 points, while the Nifty plunged 91 points in trade. Today's drop wiped out the complete gains seen in the markets on Monday.

Check rupee rates against a basket of currencies here