The rupee fell more than 0.8 percent on Tuesday to its weakest level in nearly 32 months as dollar demand from importers remained strong and worries over Europe's debt crisis kept the euro under pressure.
At 11:10 a.m. (0540 GMT), the partially convertible rupee was at 50.58/59 per dollar, after hitting 50.71, its weakest since March 31, 2009. It had closed down 0.3 percent at 50.285/295 on Monday.
Traders said the rupee could test the 51 per dollar mark during the day if the euro declines further after European markets open around 0630 GMT. It is possible that the rupee could move towards 51 given the fact that the support at 50.65 did not hold strong and the euro also seems to be heading lower, said Hari Chandramgathan, a senior foreign exchange dealer with Federal Bank.
Exporters are unlikely to provide much support for the rupee at current levels given the likelihood of further weakness in the short term. Even the exporters know they could get better levels if they wait for some more time. So there are no positive for the rupee from that side, said a senior foreign exchange dealer at a state-owned bank.
The euro was at $1.3608, down from $1.3664 at end of rupee trade on Monday, while the index of the dollar against six major currencies was at 77.605 points from 77.304 points previously.
The rupee is already the worst-performing Asian currency, weakening by more than 13 percent from its strongest point in late July. It is down nearly 12 percent so far in the calendar year.
The one-month onshore forward premium was at 29.50 points from 27.50 on Monday, the three-month was at 71.50 points from 68.50 and the one-year was at 181.75 points from 172.75. One-month offshore non-deliverable forward contracts were quoted at 50.95, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX were all at 50.73. The total volume was $1.66 billion.