The rupee slipped on Monday, tracking overseas gains in the dollar after Japanese intervention in the foreign exchange market and negative local shares, and traders said month-end demand for the greenback from importers could weigh further.
At 10:46 a.m., (0516 GMT) the partially convertible rupee was at 48.8425/8500 per dollar, against its 48.7550/7650 close on Friday, when it posted its biggest single session gain in nearly 11 months. It has traded in a 48.77 to 48.88 per dollar range so far in the day.
Broad dollar strength is influencing the rupee here... gold importer and month-end dollar demand is keeping up the pressure on rupee, a trader with a state-run bank said.
Traders see the rupee in a 48.75 to 48.95 per dollar band for the day.
The dollar spiked to a three-month high against the yen on Monday after Japan intervened in the currency markets for the third time this year to stem the yen's rise.
The euro was at $1.3998, compared with $1.4148 at the end of local trade on Friday, while the index of the dollar against six major currencies was at 76.212 points versus 75.079 points.
Indian shares fell more than 0.6 percent in early trade as investors turned cautious after four straight sessions of gains and weak sentiment in other Asian markets.
Dealers said dollar buying by corporates also pulled the Indian unit lower, while demand for dollars from oil and gold importers could hurt further.
Oil is India's biggest import item and oil importers, the largest buyers of dollars in the local market, generally make payments at the close of every month.
Oil prices fell, with traders cautious ahead of the Group of 20 leaders' meeting later this week that will focus largely on the European debt crisis.
The one-month onshore forward premium on the rupee was at 26 points from 24.75 on Friday, the three-month premium was at 66.50 points from 65.50 and the one-year premium was at 160.50 points, from 148.
The one-month offshore non-deliverable forward contracts were quoted at 49.12, weaker versus the spot rupee rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at 49.1000, 49.0975 and 49.1025 respectively. The total traded volume on the three exchanges was $874 million.