Traders said there was also scattered demand for dollars for defence-related payments.

At 10:41 a.m. (0511 GMT), the partially convertible rupee was at 49.8350/8400 per dollar after hitting 49.87, a level last seen on Oct. 24 and 0.7 percent weaker than its previous close of 49.4750/4850.

"It (dollar) has run up only because of corporate buying, but I think we are nearing the top end of the range for the day," a trader with a private bank said.

The rupee is seen moving in a 49.39-49.95 range, with traders cautious ahead of a market holiday on Thursday.

The main stock index erased early gains and seesawed, with banks among the losers after Moody's downgraded its outlook on Indian banking.

The euro fought stiff chart resistance on Wednesday following a rally after Italy's premier said he would resign, but its outlook remained gloomy amid the political turmoil engulfing both Greece and Italy and with those countries' borrowing costs showing no signs of easing.

The euro was at $1.3825, compared with $1.3770 when the rupee closed on Tuesday, while the index of the dollar against six major currencies was at 76.656 points versus 76.948 points.

Traders said India's rising trade deficit also hurt the rupee.

Trade deficit in October is seen at $19.6 billion, the highest in four years, the trade secretary said on Tuesday, citing provisional data. At this rate, the trade deficit for the year could breach $150 billion, Rahul Khullar said.

The one-month onshore forward premium was steady at 24.75 points from Tuesday, the three-month was at 64.25 points from 65 and the one-year was at 174.75 points from 178.75.

One-month offshore non-deliverable forward contracts were quoted at 50.12, weaker than the onshore spot rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and the United Stock Exchange were both at 49.9525, while those on the MCX-SX were at 49.9425. The total volume was at $1.36 billion.