Month end demand for dollars from oil marketing companies also added to the pressure on the rupee. Today's drop was more on account of sentiments given that the RBI did not cut repo rates on Tuesday.
The Indian currency has appreciated sharply over the last couple of months, following a slew of reform measures initiated by the UPA II government.
Sharp increase in dollars through foreign fund flows has also supported the rupee. However, fund flows from FIIs have started dwindling and equity markets have started dropping. This may have an adverse impact on the rupee in the short term.