The rupee fell 0.2% to 95.9575 per US dollar, eclipsing its previous low of 95.7950 on Wednesday. It closed at 95.7625, marginally down from its previous close.
The currency fell after Bloomberg News reported that India is considering cutting taxes paid by foreign investors on the country’s bonds.
Policymakers are exploring ways to shore up dollar inflows to bolster foreign exchange buffers and stem mounting pressure on the rupee, Reuters reported last week.
The months-long Iran war, which has driven up crude and gas prices sharply amid supply disruptions, threatens to slow growth and raise inflation in India, which imports about 90% of its oil needs and about 50% of its gas needs.
The country is facing a third consecutive year of a balance of payments deficit, prompting economists and traders to beat expectations of continued rupee weakness, even as central bank interventions curb excessive volatility.
Analysts at Nomura expect policymakers to use regulatory measures to manage the deficit.
The deficit “reflects a more volatile global environment, but it requires a deep rethink of how India should manage the external sector in the coming years,” they said in a note.
Prime Minister Narendra Modi had earlier urged citizens to save foreign exchange reserves, while the Union government has increased tariffs on imports of the precious metal.
The central bank sold FX reserves to ease the pressure and took rare regulatory action to support the currency.
Meanwhile, government data showed wholesale inflation hit a three-and-a-half-year high in April, one of the first signs of the impact of the energy shock on India’s economy.
India is yet to hike retail fuel prices and analysts at Barclays believe “an increase of INR5/litre for both petrol and diesel in May is imminent, as crude oil prices continue to rise.”
Brent crude oil futures last settled at $105.95, up more than 45% from before the start of the Iran war.
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