The Indian rupee fell 0.4 per cent on Wednesday to 96.7750 per dollar, its weakest level since mid-May and just 18 paise shy of its all-time low of 96.96.

The slide followed the RBI’s hawkish rate hike and stance change. It surprised several market participants, as external cues had not deteriorated materially.

Higher oil prices are adding to the pressure. Brent crude climbed above $102 a barrel on Thursday on worries about Middle East supply. India relies on imports for most of its crude.

A currency trader said the fall reflects catch-up in domestic positioning after the RBI decision. The 97 per dollar mark will be important for near-term flows.

On Thursday, the rupee recovered slightly to 96.65 after RBI intervention. Analysts say the central bank is comfortable only with a measured weakening.

The fall was notable since it came after days in which the RBI had appeared comfortable with only a measured weakening. The slide surprised several market participants.

India’s forex reserves are diminishing, adding to unease about the rupee’s stability. The central bank has been intervening to smooth sharp moves.