The rupee fell to an almost three-year low tracking the fall in the domestic equity markets and the weak euro. Dollar demand from oil companies also added to the rupee's decline, said dealers.

On Tuesday the rupee opened lower at 50.46 and touched a low of 50.74 during day trade. It closed at 50.67, against the previous close of 50.30/31. This level was last seen in March 2009, said dealers.

The mounting debt crisis in the euro zone is driving investors to safe heaven currencies like the US dollar. In addition, concerns like the rising fiscal deficit in India are also negative for the rupee.

According to Mr Hemal Doshi, Chief Financial Strategist, Geojit Comtrade, the rupee is moving in one direction because most market participants are holding onto dollars in anticipation that the rupee will fall further.

“There is a feeling among traders that RBI may intervene only if the rupee moves closer to 52 levels, which was last seen during the 2008 financial crisis. Until then, there seems to be no factor working in favour of the rupee. There is no improvement in the global situation except some risk-rally which just lasts for a day or two,” he added.

RBI's stance

The RBI's policy would not target any specific rate and would intervene only when there is strong movement in a particular movement or if there is extreme volatility, said Dr Subir Gokarn, Deputy Governor, RBI, while speaking to newspersons on the sidelines of a seminar.

“The objective is only to stop volatility and not to fix the rate. It's (rupee) moving because supply and demand are driving it. This is happening globally. Some other countries are intervening to stem the depreciation,” he said, when asked about the RBI's response to the sustained weakening in the Indian currency.

In the overseas market the euro was close to a month's low against the dollar.

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