The Indian rupee dropped 0.8 percent to its lowest close in four months on Tuesday amid worries about political uncertainty following the recently concluded national election.
Exit polls after the fifth and final round of voting on Monday showed the ruling National Democratic Alliance was likely to fall short of a majority and may have to find allies, diverting its attention from economic reforms.
The loss in the Andhra Pradesh state election of a key NDA member, the Telegu Desam Party, on Tuesday also sparked worries about the coalition's fate in the national election.
The rupee closed at 45.3700/4200 per dollar in volatile trade, recording its lowest close since January 12, when it finished at 45.4250/4350. It was dealt at a four-month intra-day low of 45.56 on Tuesday morning.
Dollar sales by some state-run banks, through which the central bank usually intervenes, helped the rupee partly recover. But another burst of corporate demand in the evening resulted in a fall in the rupee by the close of trade.
Election jitters have caused the rupee to fall by more than three percent since April 27.
The Indian currency has wiped out nearly all the gains against the dollar made in 2004, up just 0.4 percent over December 31's close of 45.5950/6050.