The rupee depreciated on Tuesday to close at a near-record low level of 76.83 per dollar.
The weakness in Indian currency came on the back of the crash in the US oil prices and slump in the domestic stock market, analysts said.
It depreciated 29 paise to close at 76.83 per US dollar. The record low level of rupee is 76.87 which it touched last Thursday.
Financial and commodity markets off late have been on a free fall globally amid the coronavirus crisis.
The historic plunge in crude oil prices is a major factor for the weakness in rupee on Tuesday. On Monday, for the first time ever, WTI crude fell below zero and reached an all time low of -$40.32 per barrel due to a supply glut and declining storage capacity in the US.
The May contract of WTI crude is still in the negative zone and currently is trading at -$8.10 per barrel.
The Indian stock market also slumped on Tuesday with the BSE Sensex losing over 1,000 points. At 3.30 p.m., it provisionally closed at 30,636.71, lower by 1,011.29 points or 3.20% from its previous close.
The May contract of WTI crude on the NYMEX, which would end later in the day, trimmed its gains to trade at -$4.55 per barrel, higher by 87.91% from its previous close of -$37.63 per barrel. It has again risen a bit to come closer to positive zone at -$0.76 a barrel.
In a historic plunge, the May contract of WTI crude on the NYMEX fell below zero to a record low of -$40.32 per barrel on Monday.
Due to high supplies and lower offtake amid the coronavirus crisis and the worldwide standstill, the US also ran out of storage for the commodity posing a major challenge for the market.
Prices turning negative, is an unprecedented phenomenon in the oil markets as traders paid buyers to lower their stock of oil.
Brent crude is priced around $23.35 per barrel, lower by 8.68%.
The huge sums of money traded every day in WTI futures are generally settled financially, but any contract that has not closed out after expiry is liquidated with physical delivery of oil if the concerned parties do not come to an over-the-counter agreement.
Such deliveries go to the storage hub of Cushing, Oklahoma, which is connected by pipeline to Canada, the US Midwest, West Texas and the Gulf Coast. And here the current problem lies as the Cushing storage hub is rapidly filling up and fuel consumption is halted due to the coronavirus crisis.
Crude inventory surged nearly 16 million barrels in just three weeks to reach 55 million barrels on April 10.
Analysts said, the rate at which Cushing hub is filling, finding space for further storage is going to be difficult, more so for financial traders who generally do not deal in physical terms.
"Nothing much should be read into the negative May WTI futures, as the spot and June futures are in range," said Debasish Mishra, partner at Deloitte India.
The pandemic has offset the recent output cut agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies. There were hopes that agreement would stabilise oil prices, but with Covid-19 pandemic continuing, there has been a large slip in demand that is not letting a pick up in oil prices.
The price of oil has now reached a point that it is increasingly becoming difficult for higher cost producers to remain in operation and rather look at declaring bankruptcy. A lot of US shale producers are in deep trouble and analysts expect that low oil price for few more months will result in a spate of bankruptcies in US.
With world demand now forecast to plunge by over 20 million barrels per day, a 30% drop from last year, analysts say massive production cuts will be needed beyond just what has been agreed upon between the OPEC, Russia and other producers.