A rise in global protectionist measures, along with high crude oil prices, knocked out the Indian rupee in 2018, relegating it as the worst performing Asian currency of the year.
Additionally, fears over widening of the current account deficit, uncertainty due to state elections, banking sector woes and the currency contagion among emerging markets greatly weakened the Indian rupee.
However, some improvement in global risk sentiments and a sharp plunge in oil prices helped the rupee recover from its recent low levels.
On a yearly basis, the currency fell by 9.23 per cent against the USD at 69.77 from its previous close of 63.87 on December 31, 2017.
In contrast, the rupee had appreciated by 5.99 per cent to close at 63.87 to a dollar in 2017.
The Indian currency was under pressure since February 2018, due to a sharp and sudden uptick in the prices of Brent crude and other commodities.
Especially, the Brent crude price guided the rupee's trajectory for the better part of the year.
Crude oil, which accounts for a large import bill for India, had weakened the rupee to 70 per dollar-mark and eventually led it to climb to 74.47 in October.
The Brent crude had soared to $86-a-barrel mark in early October, only to register an over over 40 per cent fall to below $50 per barrel following the US decision to exempt 8 countries, including India, from the sanctions on importing oil from Iran and fears over a slowdown in global growth.
India imports about 80 per cent of its crude oil requirements and a spike in global prices fans the risk of inflation, pressuring the rupee.
"INR has had a difficult year, and was the worst EM (emerging market) Asian currency in 2018 followed by IDR (Indonesian Rupiah)," said Madhavi Arora, Economist, Edelweiss Securities' FX and Rates desk.
"Within the overall EM basket, Argentina and Turkey were the worst owing to domestic and external debt woes and political instability. This was followed by commodity currencies like Brazillian Real and South African Rand. India followed next and was the worst in EM Asia basket."
The Indian rupee was further dented as the US Federal Reserve raised interest rates four times this year which prompted foreign investors to pull out of emerging markets, including India, hurting the rupee.
The NSDL data showed that Foreign Portfolio Investors (FPIs) sold Rs 80,919 crore worth of equities, debt and hybrid instruments. The equity segment alone accounted for Rs 33,014 crore worth of outflows which was the highest in a decade.
The record outflow was second just to year 2008, when the financial markets across the globe plunged into deep recession.
Similarly, provisional data from the stock exchanges showed that Foreign Institutional Investors (FIIs) sold over Rs 73,000 crore worth of equities.
According to Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, the rupee might face some intense bouts of volatility in the initial period of 2019 on account of the interim budget and the general elections.
"The first half can see immense volatility due to general elections. A range of 68-74 can be seen," Banerjee told IANS.