The rupee headed back to the 56 level after trading in the 54 levels a few days back, as weakening equity markets saw a fresh demand for the dollar.
The currency was seen trading at 55.88 to the dollar at 9.05 am, a sharp drop of 48 paise over Friday's close. Dealers believe that the rupee may continue to show a gradual decline as the dollar has been strengthening against local currencies.
The Reserve Bank of India is unlikely to intervene, unless there is an increased level of volatility in the markets.
Meanwhile, equity markets were trading lower as global cues weakened following weak jobs data from the US. This also had an effect on the Indian rupee.