The rupee opened weaker at 45.16/17 as against the previous close of 45.15/16. "The currency fell on heavy dollar-buying by state-run and foreign banks," a dealer said. Banks were buying dollars on behalf of corporates for meeting external commercial borrowing (ECB) interest and oil payments.

"Besides, demand from Foreign Institutional Investors (FIIs) added fuel to fire," dealers said. The State Bank of India (SBI) reportedly did not resort to any significant dollar-selling to support the rupee on behalf of the Reserve Bank of India (RBI).

Foreign exchange dealers expect the central bank to intervene in case the rupee falls further beyond the 45.50 level on Thursday. "The market had hoped the RBI will offer a strong verbal support to the currency during the day, which did not materialise," a state-run bank dealer said.

"The rupee may hover at 45.35 levels for a while, as this levels match the expectations of both importers and exporters to buy and sell in the market," Centurion Bank country treasurer J Moses Harding said.

Dealers expect the central bank to squeeze liquidity harder through its daily repo and reverse repo auctions. The RBI has announced four-day and seven-day repo auctions in dated securities and treasury bills of maturities except 14 days tomorrow. According to central bank officials, the measure is aimed to suck out the excess liquidity from the system. These auctions are in addition to the regular repo and reverse repo auctions under the liquidity adjustment facility.

Dealers said there was dollar-buying by foreign banks on behalf of foreign funds exiting the stock market, while several exporters cancelled earlier dollar sales, betting on the rupee weakening further.

The RBI hiked banks' cash reserve ratio (CRR) by 50 basis points to 8.5 per cent in two stages, and the bank rate by one percentage point to 8.0 per cent. It also halved banks' refinance limits.