The rupee fell to 96.7750 per dollar on Wednesday. Here is why it keeps sliding.

First, the central bank. The RBI raised the repo rate to 5.5 per cent and turned hawkish. A hawkish bank usually supports a currency. But the move surprised traders, who rushed to reposition. That selling pushed the rupee down.

Second, oil. Brent crude is above $102 a barrel. Attacks on shipping in the Gulf and the Strait of Hormuz have raised supply fears. India imports most of its crude, so expensive oil widens the import bill.

Third, foreign investors. They sold Rs 61.21 billion of Indian shares on Wednesday. It was their ninth straight session of selling.

Fourth, the 97 level. The rupee is just 18 paise from its all-time low of 96.96. Near such marks, importers rush to hedge future dollar needs. Exporters hold back dollar sales. That imbalance adds more pressure.

Goldman Sachs expects another rate hike in December. The repo rate could move toward 6 per cent.

For now, the market is watching one question: will the RBI lean against a weaker rupee, or let it find a lower level?