The July premium declined to 2.49 rupees from 2.53 in the previous session and the 1-year implied yield dropped to 3.21% from 3.24%.
The rupee was trading at 78.64 as of 0920 GMT, compared with the previous close of 79.02. Earlier in the session, the unit had climbed to 78.50, its highest level since June 27.
"Once the dollar dropped below 79, exporters did not want to wait anymore. It looks like the change in the big figure prompted a bit of panic," a trader at a state-run bank said.
"Most of the exporters who are hedging today are covering beyond January."
Markets now await the Reserve Bank of India policy decision on Aug. 5. Predictions from the 63 economists polled between July 25 and Aug. 1 ranged from a 25-basis point hike to one of 50 bps when the central bank meets on Aug. 5.
"A 25-basis points hike will see a larger reaction than a 50-basis points will," the trader said. "To us, it makes sense to run a receive position heading into the policy."
(Reporting by Nimesh Vora; Editing by Shounak Dasgupta)
