The Reserve Bank of India, which cut its policy rate by a hefty 50 basis points on Tuesday, said scope for further reductions were limited given inflation risks and crippling fiscal deficit.
The rupee, however, ended higher on the day at 52.07/08 to the dollar, but 1.45 per cent weaker from last week's closing of 51.3050.
It had closed at 52.14/15 on Thursday.
The decline sparked talk of intervention from the Reserve Bank of India, but no price action suggesting such a move was seen this week, traders said.
The RBI releases data on intervention with a lag of nearly two months and the latest one on Monday showed that the bank had bought $1.1 billion and sold $1.4 billion in the spot market in February.
"More rupee depreciation is on the cards as the current account and balance of payments situation is definitely not comfortable," said Uday Bhatt, senior manager of dealing at UCO Bank.
India's trade deficit was at $184.9 billion in the last fiscal year primarily due to a higher crude oil import bill, an official said on Thursday.
Increase in dollar demand from gold importers stocking up supplies of the yellow metal before Akshaya Tritiya festival on April 24 was seen hurting rupee, traders said.
The Hindu festival is the second biggest gold-buying celebration after Dhanteras.
UCO Bank's Bhatt predicts the local currency to find support (resistance for the dollar) around 52.50 in case the prior strong fulcrum of 52.12 does not hold.
Technical charts suggest the next resistance level for dollar/rupee at 52.95-00, which is the 76.4 per cent retracement of December-February fall.
The rupee did briefly fall to 52.20 in the session, its weakest since January 10, but managed to pull back primarily on some big software exporter-led dollar sales, traders said.
Overall, however, the outlook is negative for the rupee which had touched a record low of 54.30 in mid-December.
"Amidst weak global demand and sticky imports, the INR is expected to remain under pressure in the near-to-medium term," said Religare Macquarie Wealth Management in a research note earlier in the week.
The one-month offshore non-deliverable forward contracts were at 52.08.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 52.17, on a total volume of $3.98 billion.
Copyright @Thomson Reuters 2012