The partially convertible rupee fell sharply to 74.60/61 per dollar by 0930 GMT versus its close at 74.3250 on Wednesday. It touched 74.63 during the session, its lowest since April 27.
Traders said demand for dollars from foreign banks continued to be seen but the unit is also expected to trade with a weakening bias on concerns over the earlier-than-anticipated unwinding of stimulus by the U.S. Federal Reserve.
"While the RBI (Reserve Bank of India) has a large FX reserves armour, it is unlikely to resist meaningfully any broad-based EM FX weakness and idiosyncratic INR depreciation as the Fed starts to taper its purchases," Upasna Bhardwaj, an economist at Kotak Mahindra Bank said.
India's forex reserves at over $600 billion can cover around 18 months of imports.
"Until any further explicit tapering signals are provided by the Fed, we expect the rupee to remain in the range of 73-75 against the dollar in the near term," Bhardwaj said.
The domestic share indexes and were both trading down 0.3%. [.BO]
The dollar index hit 3-month highs ahead of a U.S. jobs report that could offer clues on when the Fed will start to pare back stimulus.
"Exporters are advised to cover a part of their near-term exposure between 74.00-74.50. Importers are advised to cover through options. The three-month range for USD/INR is 72.50-75.50 and the six-month range is 73.00-76.50," IFA Global Research said in a report.
(Reporting by Swati Bhat)
By Swati Bhat