The Indian rupee fell sharply against the US dollar as currency markets react to the surprise exit of RBI Governor Urjit Patel on Monday evening. The domestic currency opened 1.55 percent lower to 72.44/dollar as against the previous day's close of 71.34. The yield on 10-year government bonds maturing in 2028 rose 12 basis points to 7.71 percent.

The American currency's gain against other prominent world currencies and an increase in international oil prices put further pressure on the rupee. The sudden resignation submitted by the RBI chief has caused uncertainty in the markets and raised worries of increase outflows from Indian markets.

Experts say that the resignation has given rise to a friction between the government and the central bank once again. This could make foreign portfolio investors look at it negatively on the Indian markets and we could see further selling in debt and equity. Additionally, if the outcome of the state election set to be declared today does not come in favour of Prime Minister Modi's ruling party, the rupee is most likely to hurt further.

The US dollar index that measures the greenback against 6 major international currencies rose 0.75 percent on Monday to stay above the 97.00 level after traders piled towards it amid worries of a global growth slowdown. The fall in the British Pound after Prime Minister Teresa May postponed a parliamentary vote on her Brexit deal also ruled in dollar's favour.

Additionally, the official data released last week showed widening of India's trade deficit for the July-September quarter.