The rupee opened at 69.60 on Wednesday and declined by as much as 80 paise during the session, before paring some of those losses by the end of the session.

Analysts said weak Goods and Services Tax (GST) collections triggered concerns on the fiscal deficit front.

"Weak GST collections and concerns around fiscal budget targets added to investor concerns. As a result, the Indian rupee was one of the worst performing emerging market currencies with around 0.9 per cent fall," news agency Press Trust of India quoted Sunil Sharma, chief investment officer, Sanctum Wealth Management, as saying in a report.

GST collections dropped to Rs 94,726 crore in December 2018, lower than Rs 97,637 crore in the previous month.

Sentiment also turned sour after a private survey showed manufacturing activity in the country slowed down in December compared to the previous month. The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, declined to 53.2 in December, below November's 54.0 reading and a poll median of 53.6 by news agency Reuters.

However, he said, crude holding on to the low prices bodes well for a recovery in consumer demand in coming months.

Crude oil prices declined more than 1 per cent in intraday trade on Wednesday. Brent crude - the international benchmark for crude oil - was last seen trading 0.86 per cent lower at $53.34 per barrel.

The dollar index - which measures the greenback against six major currencies - was trading 0.26 per cent higher at 96.33 in late afternoon.

Fund outflows triggered by institutional investors also put pressure on the currency. Foreign institutional investors (FIIs) pulled out a net Rs 621.06 crore from the capital markets on Wednesday, while domestic institutional investors (DIIs) net sold equities to the tune of Rs 226.18 crore, provisional data from the NSE showed.