The rupee, which is currently Asia’s worst-performing currency, hit new lows earlier today as it plunged to 73.77 against the US dollar.
However, it later clawed back some gains as the struggling tender reached 73.67.
The dramatic drop sparked furious comments from Rahul Gandhi, the Indian National Congress, who expressed his dismay at the turbulent rupee.
He tweeted: “Breaking: Rupee slips to 73.77. It’s not breaking – it’s Broken.”
Mr Gandhi took aim at Prime Minister Narendra Modi yesterday, accusing him of remaining silent over the rupee crisis.
Tweeting in Hindi, the Times of India reported that he said: “The rupee has crossed the 73 mark and price rise is causing an outcry.
“Fuel and gas prices are on fire and markets are scurrying.
“Till when will the 56-inch chest be on ‘silent mode’.”
It comes just one day before the Indian central bank is expected to raise rates on Friday to prop-up the rupee.
The bank are predicted to act to tackle rising US interest rates, capital outflows from emerging markets and India’s weakening balance of payments and current account deficit.
An expected rate hike would be the Reserve Bank of India’s (RBI) third this year, after it lifted borrowing costs in June and August.
A. Prasanna, chief economist at ICICI Securities Primary Dealership, predicted the RBI will hike interest rates by 25 basis points to combat inflation risks from costly crude oil.
India currently imports more than two-thirds of its oil needs.
He said: ”You cannot wish away the depreciation in the rupee if you are a current account deficit country.”
Mr Prasanna went on to reason that India would not want to “fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates”.
DBS economist Radhika Rao also predicted a rate hike.
She said: “For bond markets, a 25 bps hike accompanied by a hawkish stance could trigger the 10-year bond yield to rise to 8.25 percent.”
Anindya Banerjee, deputy vice president, currency derivatives at Kotak Securities, added: “The RBI is ready to keep real rates high because the policy mandate is to anchor inflation.
“The biggest policy anchor for rupee is high real rates. Raising the repo rate will increase the real interest rates and help in attracting fresh foreign inflows which will help in containing the rupee.”
Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year’s largest weekly build in US crude stockpiles.