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The rupee opened lower on Thursday at 56.50 and fell further to hit a record low of 56.52, continuing its downward momentum against the US dollar. It had ended at a record closing low of 56.23/24 per dollar.

The Indian currency has fallen for the third successive session, as oil importers ramped up demand for the greenback ahead of the end of the month, while global risk assets were hit by worries about Spain. Risk aversion deepened over continued euro zone worries, setting up expectations about potential intervention from the Reserve Bank of India.

Though global cues are providing the trigger, traders said the rupee was also being weighed down by deep concerns about India’s fiscal and economic challenges, and doubts about slowing policy reforms.

Traders are looking ahead at gross domestic product data on Thursday, with India expected to say its economy grew at 6.1 per cent in the January-March quarter, the slowest in almost three years.

"Unless the RBI keeps coming in with measures, the rupee will continue to remain under pressure. There are still a huge amount of open importer positions remaining," said Subramanian Sharma, director at Greenback Forex.

The partially convertible rupee settled at, which marked a record closing low, and was not far the all-time low of 56.40 hit on Thursday. The rupee had closed at 55.67/68 close on Tuesday. Traders said the central bank had not been spotted intervening, but believe that could change should the rupee fall towards its all-time lows.

The Reserve Bank of India was believed to have intervened in spot and forward markets when the rupee hit seven consecutive record lows over the previous two weeks. On Wednesday, traders cited strong dollar demand from oil importers looking to meet their commitments at the end of the month.

Indian markets looked set for another down day amid global weakness. The Nifty futures on the Singapore index traded 43.50 points or 0.88 per cent lower at 4,889.50 at 08.40 a.m. "It is time to take short trade. If the nifty closes below 4,900, the reversals are in place," independent analyst Sarvendra Srivastava said.

Global risk aversion also weighed as the euro hit a two-year low on Wednesday, hurt by worries about Spain’s soaring borrowing costs and expectations that more spending may be needed to support its ailing banks.

Meanwhile, Moody’s said that significant depreciation of the Indian rupee is insignificant for India’s sovereign credit. "Government foreign currency debt comprises only 7 per cent of total government debt and 5% of GDP. Most of it is owed to multilateral and bilateral creditors and has a maturity profile that keeps annual foreign currency repayments relatively low. Therefore, the direct effect of depreciation on the government’s own debt repayment capacity is limited," Moody’s said in a report.

The rupee has been depreciating to new lifetime lows on increased dollar demand from importers, especially oil refiners coupled with capital outflows from foreign funds. Even selling of the American currency by exporters and banks failed to check persistent fall.

Dollar has been appreciating against a basket of currencies worldover. Dollar Index has hit a 20 month high in trade, while Euro has been depreciating, down over 5 per cent this month against the US dollar and Yen.

According to Standard Chartered, Rupee may drag to 58.60 levels against the dollar on account of technical weakness. Morgan Stanley, however, expects rupee to cross levels of 60 and touch 62.70/$.