The rupee traded sharply lower on Wednesday, breaching the key 68.50 per dollar mark in early trade. The partially convertible rupee hit a low of 68.60 and came within striking distance of surpassing the all-time low of 68.65 hit last week.



There was a small recovery, but the currency failed to pull back below the 68 levels. As of 10.10 a.m., the rupee traded at 68.25 per dollar as against Tuesday's close of 67.63.



Wednesday's fall came on the back of sharp gains in the US dollar, which rose to a six-week peak against a basket of major currencies. The dollar has been strengthening after US President Barack Obama clinched the backing of two key figures in Congress in his drive for limited U.S. strikes on Syria.



The possibility of a withdrawal of monetary stimulus by the U.S. Federal Reserve has been a worry since May 22. The rupee has shed around 20 per cent since May as India felt the brunt of the selloff in emerging markets. It has been singled out by investors for punishment due to its reliance on capital inflows to paper over widening deficits.





The Street has now pinned its hopes on Raghuram Rajan, who takes over as the governor of India's central bank today, to come up with a strong strategy to defend the rupee.

Stock markets fluctuated wildly. The BSE Sensex traded 0.9 per cent higher at 18,400, while the broader Nifty traded close to the 5,400 levels, gaining 49 points.(With inputs from Reuters)