The Indian rupee fell past 95 per dollar on Wednesday, with rising oil prices undoing the central bank's recent efforts to prop up the currency.
The rupee opened weaker and remained under pressure through the morning session, breaching the 95-per-dollar level with little resistance to drop to a low of 95.2250.
The past two sessions have been something of a reality check for the rupee, bankers said.
The central bank is said to have intervened almost daily to raise the currency toward 94.30 last week, but oil risks have returned to push back the South Asian unit.
The rupee's fall is "a reminder that the rupee cannot completely insulate itself from outside developments," said CR Forex. "And right now, those realities are becoming increasingly uncomfortable."
Brent crude extended a rally on Wednesday, heading toward $100 a barrel, on escalating military tensions in the Middle East and mounting concerns over disruption to supplies, a pain point for India, the world's third-largest oil importer.
The RBI likely intervened on Tuesday and Wednesday, bankers said, though the price action suggests its presence was less forceful and underscored the scale of underlying dollar demand.
Stop-loss selling on rupee-long positions added to the pressure on Wednesday, bankers said, accelerating the currency's decline once 95 was breached.
The shift in RBI intervention was not unexpected, a currency trader at a bank said.
With oil prices continuing to rise and probably leading to greater underlying demand for dollars, the RBI could not be expected to indefinitely stand in the way of rupee weakness, a banker said.
The rupee was the worst-performing Asian currency on Wednesday, with other oil-sensitive currencies faring better.
The underperformance reflected both the rupee's recent rally driven by RBI intervention and market expectations that higher oil prices could persist, leaving the currency more exposed to the worsening external backdrop, traders said.
