A firm dollar overseas and demand for the US currency from importers weighed on the rupee, dealers said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced strong at 59.63 and improved further to a high of 59.57 on sustained dollar selling by exporters.
However, late profit-booking in local stocks and fresh dollar demand from importers pulled it down to a low of 60.22 before settling at an almost three-week low of 60.19.
Today's fall of 44 paise, or 0.74 per cent, is the worst drop of since the 52 paise plunge on June 13, 2014.
"Rupee was seen gaining initially taking cues from the local stock markets after the Finance Minister's proclamation that government has contemplated to keep the fiscal deficit target of 4.1 per cent of GDP unchanged. Later, however, rupee was seen paring its gains as the market participants were seen booking profits on their positions immediately after Budget was unveiled," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The Indian benchmark Sensex today declined further by 72.06 points, or 0.28 per cent, in highly volatile trade.
FIIs injected Rs 645.19 crore yesterday, as per provisional data.
The dollar index was up by 0.14 per cent a day after the Federal Reserve revealed key elements of its exit plan for bond-buying and as the parent of a Portuguese bank delayed payments on some short-term debt.
Pramit Brahmbhatt, Veracity Group CEO said: "Today the rupee lost almost 0.75 per cent taking cues from the mixed finance budget announced during the day. Local equity closed down by quarter per cent which further depreciated rupee. The trading range for the spot rupee is expected to be within 59.70 to 60.70."