Dealers said trade was seen at levels of 71 rupees to the dollar. The rupee had closed at 70.13/18 to the dollar on Saturday and has shed four per cent since the start of the month.
The rupee is now beyond levels last seen in late May, when a precipitous fall prompted the central bank to take steps, including raising the key discount rate to 12 per cent from 10 per cent, to stabilise the currency and dampen speculation.
"There is panic in the market and fundamentals are still weak," said a currency dealer.
"The outlook seems to be quite bleak."
The rupee has been under pressure because of a rise in demand for dollars from importers for payments, particularly oil payments, and there has been a steady drip in foreign currency reserves.
It has fallen 15.3 per cent against the dollar this year as the economy feels the brunt of rising oil and food costs.
Annual inflation has jumped to a three-decade high and the country is facing widening fiscal and current account deficits. Traders said intervention by the central bank, which closely shepherds the exchange rate, would stabilise the rupee in the short-run but the State Bank's reserves were running low because of the weight of demand for dollars from importers.
According to official figures, $1.42 billion of foreign reserves was used to cover the oil import bill in May. The monthly average between February and May was $1.27 billion.
With rising oil prices, the oil import bill is expected to increase and with foreign reserves of $11.3 billion, analysts said the outlook was bleak.
Foreign exchange reserves have fallen to $11.3 billion, in spite of fresh inflows, from a record high of more than $16 billion in October.
Traders said the central bank would probably have to raise interest rates in a policy review later this month to try to bring rising prices under control.
"There needs to be much more aggressive tightening of monetary policy," said Sanjay Mathur, an economist with Royal Bank of Scotland in Singapore.
In a presentation to President Pervez Musharraf on Saturday, the governor of the State Bank said rising international fuel and commodity prices had considerably increased the pressures on the balance of payments, fiscal accounts and inflation. —
The study takes into account premium office rents of Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM)
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