The Ecuador international went down after an innocuous looking tackle by Kirk Broadfoot just past the hour and both sets of players immediately signalled for the stretcher.
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The Old Trafford crowd fell silent and Broadfoot looked visibly shaken as Valencia lay motionless on the pitch before being taken off with an oxygen mask covering his face.
United manager Sir Alex Ferguson likened the injury to that of forward Alan Smith, who broke his leg and dislocated his ankle playing for United in 2006, an injury Ferguson described at the time as "one of the worst I've seen."
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"It is a dislocation and a fracture, he'll be operated on tomorrow morning," Ferguson told a news conference after the 0-0 draw in the Group C opener at Old Trafford.
"It's similar to the injury that Alan Smith got, so it's probably the rest of the season," he said of the club's former player who recovered and now plays for Newcastle United.
"It was a really innocuous challenge really. When I saw the Rangers player waving, I knew it was a bad one."
Valencia seemed to catch his studs in the grass before falling awkwardly, with his ankle at a sickening angle.
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