On Tuesday, the rupee dropped to a lower level by 43 paisa to Rs. 45.40 against the American currency in early trade on constant dollar demand from banks and importers in view of dollar gains overseas amid weak equity markets.

At the Interbank Foreign Exchange, the rupee has resumed lower position at 45.38/39 per dollar, a significant deviation as compared to previous close of 44.97/98 per dollar and slipped to 45.40 per dollar before quoting at 45.21/22 per dollar at 1030 hours. In addition, the dollar has reported a better position against euro in the New York market, yesterday.

"Assuming an outstanding bill of $5 billion to Iran, I think there is a fair bit of oil related dollar buying still to come", notified a Senior Foreign Exchange dealer at a private-sector bank. "So the rupee's direction will be impacted by the quantum of oil dollar buying we see".

While commenting on the existing market scenario, traders said that exporters were cashing in their dollars with the rupee falling sharply over the past one week. Further, they claimed that there is a big support for the rupee near 45.50 level and unless equities drive off the cliff.