The rupee fell to 96.7750 per dollar on Wednesday, close to its all-time low of 96.96. Here is why the Indian currency is under pressure.

First, the RBI raised interest rates. Higher Indian rates should normally support the currency. But the central bank’s hawkish tone worried investors. Foreign investors pulled a record $30 billion from Indian shares this year. Money leaving the country weakens the rupee.

Second, oil prices are high. Brent crude is above $102 a barrel. India imports most of its crude oil. Costlier oil means India pays more dollars for imports. That raises demand for dollars and pushes the rupee down.

Third, the dollar is strong globally. US bond yields are at multi-year highs. Investors prefer dollar assets when global rates are high. A weaker rupee makes imports costlier and can push up inflation in India.

A weaker rupee also makes foreign travel and education abroad costlier for Indians. The RBI watches the currency closely and steps in to smooth sharp moves.