The Indian rupee (INR), pushing a new low of 78 against the US dollar, slipped in early trade on Thursday, continuing its overnight slide despite the central bank’s intervention.
The pair was last trading at INR77.79/dollar, after touching a record low of 77.81, according to data provider Refinitiv.
The weakness tracked rising oil prices and sales of Indian equity holdings by foreign portfolio investors in recent months.
The Reserve Bank of India’s (RBI) presence is deterring speculators from freely expressing a long USD/INR view, said Mumbai-based IFA Global Research said in a note.
"The takeaway was that the RBI is unlikely to turn a blind eye towards growth while trying to bring inflation back below 6 percent."
On Wednesday, the RBI raised the repo rate by 50 basis points to 4.90 percent with immediate effect, in a bid to curb rising inflation. The higher crude prices are also set to fuel inflation further.
"We are seeing risk off moves overnight. Dollar has strengthened across the board. Higher crude prices and higher US treasury yields are likely to weigh on domestic bonds today. The USD/INR pair is likely to trade within 77.60-77.80 range with a sideways price action," said IFA Global.
Inflation in India rose to an eight-year high of 7.8 percent on year in April, up from 7 percent in March, the fourth consecutive month of increase at or above the upper tolerance level of 6 percent.
(Reporting by Brinda Darasha; editing by Seban Scaria)