At 2.34pm, the home currency was trading at 74.09 a dollar, down 0.61% from its Thursday's close of 73.58.
The rupee, which is now Asia's worst-performing currency, hit new lows earlier today as it plunged to 73.77 against the U.S. dollar. Brent, the global benchmark for crude, traded at $85 in Wednesday morning trading.
The central bank's Monetary Policy Committee said that "global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook".
"Fuel and gas prices are on fire and markets are scurrying".
She said: "For bond markets, a 25 bps hike accompanied by a hawkish stance could trigger the 10-year bond yield to rise to 8.25 percent".
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Foreign institutional investors (FIIs) sold shares net worth a net of Rs 1,842 crore Monday, provisional data showed.
To stem the rupee fall, the RBI on Wednesday allowed oil companies to access foreign capital of United States dollars 10 billion on a long-term basis to finance their working capital requirements. With the rupee falling against the greenback, rising crude oil prices have a compounding effect on consumers in emerging market economics like India, analysts said.
At the interbank foreign exchange, the rupee opened lower and slipped further to a fresh low of 73.77 a dollar against 73.34, a fall of 43 paise. It came down to Dollars 17.4 billion in August.
Bank of America Merrill Lynch in a report explained that pre-committing United States dollars 8 billion a month for it over and above the USD 25-30 billion lost in interventions since April will push the overall forex reserves below the critical eight-month import cover mark. Indian equities fell about 1.6 per cent. Traders said the Reserve Bank of India likely intervened to curb the rupee's fall.
However, without any clear signals from the central bank, the rupee crashed to all-time low before settling at 73.34.