The Indian rupee fell to its weakest level since mid-May on Wednesday. It closed 0.4 per cent lower at 96.7750 per dollar. The currency now sits just 18 paise away from its all-time low of 96.96.

The fall came after the Reserve Bank of India raised the repo rate by 25 basis points. It was the central bank’s first rate hike in four years. The RBI also shifted its stance from neutral to calibrated tightening. Some economists called the move hawkish.

Traders said the slide surprised many market watchers. The rupee had been weakening in a measured way for days. The policy decision changed that pace. Hedging costs to protect against further weakness have surged this week.

Higher oil prices added to the pressure on Thursday. Brent crude climbed above $102 a barrel on worries about supply from the Middle East. India imports most of its crude oil needs. A weak rupee and costly oil together raise the country’s import bill.