Domestic risks are also rising after RBI kept rates on hold, while the increasing likelihood of a drought in India spark fears of a delay in fiscal steps such as raising diesel prices.
In worst-case scenario, rupee risks getting caught in the same maelstrom of global and domestic risk factors that pushed it to record lows in May and once again in June.
Central bank action, or strong hints that measures such as QE3 are coming, could reverse the situation.
The rupee faces initial resistance at the May 24 low of 56.40, followed by the May 31 low of 56.52.
A sustained breach of those levels opens the way to 56.58, the 76.4 percent Fibonacci retracement of the rupee's rises from its record low of 57.32 on June 22 to the July 4 high of 54.18.
Copyright @Thomson Reuters 2012