The rupee struggled to make headway after a two-day climb and backtracked to end sharply lower by 43 paise to 72.63 against the US dollar after crude prices soared ahead of impending US sanctions on Iran.

Reversing its recovery momentum, the rupee opened lower at 72.47 from the weekend close of 72.20 at the inter-bank foreign exchange (forex) market.

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Keeping the downtrend intact, the local unit lost further ground to hit a session low of 72.73 in mid-afternoon session before concluding the day at 72.63, revealing a steep loss of 43 paise, or 0.60 per cent.

Overall, forex sentiment took a huge beating after weekend’s spirited recovery on a combination of factors.

The price of Brent oil climbed past USD 80 a barrel once again, pushing the global benchmark to its highest close in almost four years after OPEC and its allies decided to keep their production in check amid looming US sanctions on Iranian exports.

Concerns about new US tariffs on China weighed on the mood after Beijing walked away from trade talks with the US, stocking trade war escalation fears.

The rupee had recovered a healthy 78 paise in the last two sessions after crashing to a historic low of 72.99 last week.

A massive selloff in domestic equity market last week, spooked by debt default and liquidity concerns, got accelerated on Monday with the key benchmark indices plunging to multi-month lows, which also weighed on rupee front.

Forex dealers said besides strong month-end demand for the American currency, mainly from oil refiners in view of surging crude oil prices and capital outflows, affected the domestic currency.

The rupee could come under mounting pressure in coming days as a strong crude oil market is hurting India’s macroeconomic stability, which could in turn spur flight of capital, they added.

The rupee has been battered for over a month now amid sell-offs sweeping emerging markets following a rout in the currencies of Argentina and Turkey. The domestic unit has set a string of record lows, dampening some of the optimism about India’s world-beating economic growth.

Meanmwhile, India’s foreign exchange reserves rose by USD 1.207 billion to USD 400.489 billion in the week to September 14 on account of increase in foreign currency assets, according to RBI data.

In the previous week, forex reserves had declined by USD 819.5 million to USD 399.282 billion.

Foreign funds and overseas investors, however pulled out a massive Rs 15,365 crore (USD 2.1 billion) from the capital markets so far in September, after putting in funds during the previous two months, on growing fears over widening current account deficit coupled with global trade tensions.

In the meantime, Fitch Ratings has upwardly revised its forecast for India’s economic growth to 7.8 per cent from 7.4 per cent for the current fiscal.

The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 72.6927 and for the euro at 85.2535.

In the cross currency trade, the rupee remained under intense pressure against the British Pound and ended at 95.41 per pound from 95.28 and also slumped against the euro to finish at 85.43 from 84.96 earlier.

The home unit also retreated against the Japanese yen to close at 64.50 per 100 yens from 64.06.

On the global front, the dollar slipped against major trading rivals as investors searched for fresh clues to extend a multi-month rally in the greenback before a widely expected interest rate hike by the US central bank this week.

Against a basket of other currencies, the dollar index is down at 93.75.

In forward market, premium for dollar edged higher due to mild paying pressure from corporates.

The benchmark six-month forward premium payable in January 2019 gained to 114.50-116.50 paise from 113-115 paise and the far-forward July contract moved up to 276-278 paise from 271.50-273.50 paise.