In a related development, the pound sterling breached the 72-mark to touch a low of 72.50, before closing at 71.60. The sterling had breached the 70- mark on Monday.

The Reserve Bank of India (RBI) did not intervene in the market, dealers said. The month-end pressure on the rupee might see it closing at 43-level on Wednesday, dealers said.

Finance minister Yashwant Sinha's statement that the RBI will not intervene to defend the rupee led the market to test the 43-mark on Tuesday. Forward premiums, however, remained stable.

With the 20 paise fall, the rupee has depreciated by 2.8 per cent in June. Dealers said that the rupee might cross the 43-level and close at 43.05/10 on Wednesday, if the Reserve Bank does not intervene orthe State Bank of India starts selling dollars."The rupee should bottom out at 43," Standard Chartered Bank's economist Vasan Sridharan said.

According to Essar group forex head NS Paramasivam, the rupee is likely to fall further, unless the government or the RBI indicates a level for it. "Exporters will stop coming in if the rupee continues to fall like this, and importers will continue to panic," a dealer with a private bank said.

The rupee slide as triggered off by the nuclear blasts on May 11, followed by the US sanctions and the international rating agency Moody's decision to downgrade India to the speculative grade.

The currency opened at 42.85/90 on Tuesday, against Monday's closing level of 42.71/74, and immediately weakened to 42.95. At this point, panic-driven import-covering saw the rupee fall below the 43-mark. Dealers said that deals were confirmed at 43.05 and there were quotes at 43.08, but no deals were struck.

After the first hour of trading, the rupee stabilised and clawed back to42.89/91. Most deals were conducted at these levels, but the rupee marginally weakened to close at 42.90/92. In the forward segment, the rupee remained stable on Tuesday, as exporters came and received as soon as the premiums touched higher levels. The six-month forward rose to 13 per cent, but later fell to close at 12.25 per cent.

"Exporters are selling as soon as the premiums rise, which is causing a downward movement in the premiums," a dealer with a private bank said. Dealers said that they expected the six-month forward to harden further on Tuesday, but continuous receiving by exporters kept it on the lower side. The one-month forward eased marginally to close at 13.25 per cent, down from its previous close of 13.95 per cent, and the one-year forward closed at 12.40 per cent.