The Indian rupee crashed by 73 paise to close at two-month low of 62.66 against the US currency on on strong dollar buying by banks and importers.

Forex dealers said weakness in local equities cast a shadow on the rupee. Dollar losing in overseas markets didn't impact the fall of the local currency, they added.

Dollar short-covering by some banks was triggered at 62.45-62.50 level pulling down rupee further at the fag-end.

"The month-end dollar demand, downbeat data from China and Fed’s tapering plan are all seen putting pressure on the rupee," said Abhishek Goenka, CEO of India Forex Advisors.

The Federal Open Market Committee, responsible for open market operations in the US, is meeting for two days on January 28 and January 29.

At the Interbank Foreign Exchange market, the local unit resumed lower at 62.12 a dollar from last close of 61.93.

It attempted a recovery at 62.07, but soon fell to a low of 62.73 before settling at 62.66, a fall of 73 paise.

This is the biggest one-day fall in rupee since November 11, 2013 when it had tumbled by 77 paise.

The last time the rupee closed at today's level was on November 22, 2013, when it finished at 62.87.

Meanwhile, the benchmark BSE Sensex tumbled by 240.10 points or 1.12 per cent.Foreign institutional investors injected USD 75.81 million yesterday, as per Sebi data.

The dollar index was down by 0.30 per cent against a basket of six major global rivals.

Forward dollar premiums recovered on fresh payments from banks and corporates.

The benchmark six-month forward dollar premium payable in June rose to 213.5-215.5 paise from 210-212 paise previously.

Far forward contracts maturing in December shot up to 457-459 paise from 447-449 paise.

The RBI fixed the reference rate for the dollar at 62.17 and for the euro at 85.08.The rupee slumped to 103.92 against the pound from last close of 102.81. It tumbled to 86.00 per euro from 84.44 previously. The local unit tanked to 61.41 per 100 Japanese yen from 59.37.