"I tried to play and I wanted to play, but there were recommendations from the doctors", he said.
"I feel that I can give a good level of tennis, but I can't do my 100 percent".
However, after conferring with his doctors he chose to withdraw to ensure he would be fit to play the Australian Open later this month.
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"I did an MRI and it shows a small strain on my left thigh", Nadal told reporters.
This latest issue is a dispiriting blow for the world number two but he will hope sitting out this week will enable him to be fully recovered for the year's first grand slam, which starts on January 14. I feel better than four days ago.
'I have great memories out here and of years playing great matches.
HERE, Nadal talks to the press about what we can expect to see from him on the upcoming tour. Roger Federer, Novak Djokovic, Alexander Zverev and Lucas Pouille all said that they will not play the one-week final stage this year, which means already three current top 10s are sidelined.
The 17-time Grand Slam champion was replaced by Japan's Taro Daniel in the second round against France's Jo-Wilfried Tsonga.
"I really believe that I will be 100 per cent ready for Melbourne".
The Spanish star endured a hard 2018, playing just nine tournaments before undergoing ankle surgery in November.
"And was bad news for me that things were not the way that I planned, but coming back from a period of time outside of the competition and coming back from surgery, you know, there's always a chance that this kind of stuff happens".