The Indian rupee slid to its weakest level in more than two months on Thursday, hurt by dollar demand from importers, putting traders on the lookout for possible intervention by the central bank to shore up the local currency.
At 10.42 am (0512 GMT), the rupee was at 50.88/89 to the dollar, after touching 50.9150, its weakest since Jan 17. It closed at 50.66/67 on Wednesday.
"So far there is genuine demand for dollars in the market, but that said there is strong expectation of intervention from RBI (Reserve Bank of India) if the rupee weakness continues to be sharp," said a foreign exchange dealer with a state-owned bank.
The shaky global risk appetite due to increasing worries on growth thanks to weak Chinese PMI data weighed on the rupee and any moves in the foreign currency market by the central bank will be seen as a major relief, traders said.
Some traders, however, are waiting to see if rupee drops past the 100-day moving average of 50.87 convincingly.
"There is technical support for the rupee around 50.90-50.95 and only if rupee breaks past that to move into the 51 mark," said a senior foreign exchange trader with another state-owned bank.
The RBI has been actively intervening in the forex market over the past few months and is suspected to have sold dollars as recently as Wednesday.
The central bank had sold a net $7.3 billion in January in the spot market, after sales of $7.8 billion in December, data released by the RBI last week showed.
China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed.
The one-month offshore non-deliverable forward contracts were at 51.35.
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 all around 50.90, on a total volume of $1.15 billion.