MUMBAI: The Indian rupee hit an 8-1/2 month low on Wednesday as global gains in the dollar ahead of the release of U.S. Federal Reserve minutes later in the day and slumping crude prices spurred oil firms to accelerate their greenback purchases.
Fed minutes come amid rising expectations the U.S. central bank is moving towards eventual rate hikes, in contrast to the European Central Bank or the Bank of Japan.
Any U.S. rate hikes could end up hitting emerging market currencies such as the rupee, despite the accommodative stances in countries outside the United States.
But traders say relatively better economic fundamentals in India could protect the rupee from steep falls compared with other emerging market currencies.
"The dollar demand from oil companies should continue at least till the end of the month," said Anish Vyas, a currency analyst at Angel Securities in Mumbai.
"However, hopes of rate cuts and positive reforms from the government should limit any major fall in the rupee."
The partially convertible rupee closed at 61.96/97 per dollar versus its previous close of 61.74/75, after earlier touching a low of 61.9950, its weakest level since March 4.
Falls came after the dollar hit a fresh seven-year high against the yen on Wednesday, and held near a 14-month peak versus sterling, ahead of the Fed minutes.
Meanwhile, Brent crude oil slipped towards $78 a barrel on Wednesday as data showed Saudi Arabia increased crude exports in September.
Slumping crude prices have spurred Indian oil refiners to augment their oil stocks.
In the offshore non-deliverable forwards, the one-month contract was at 62.26/36, while the three-month was at 62.83/93.
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