The rupee on Wednesday plunged to a new record low of 96.86 against the US dollar, intensifying concerns over India’s external sector as soaring crude oil prices, rising US bond yields and persistent global risk aversion combined to exert pressure on the domestic currency.

The sharp depreciation has fuelled speculation in currency markets that the rupee could weaken toward the psychologically significant 100-per-dollar mark if geopolitical tensions in West Asia persist and oil prices continue to climb.

The currency fell 16 paise on Wednesday and briefly moved close to the 97 level before intervention by the Reserve Bank of India helped trim losses, traders said. The rupee has now declined more than 7 per cent so far this year, significantly higher than the 3-4 per cent annual depreciation range that the central bank has previously described as manageable given India’s inflation differential with advanced economies.

“Indian rupee hit fresh lows on a strong dollar and a surge in US treasury yields. This led to inflation worries and a sell-off in global markets, making investors risk-averse,” said Anuj Choudhary, research analyst at Mirae Asset Sharekhan.

The central bank could step in with fresh measures, including steps to attract external capital, around the 97-97.50 level, according to Dhiraj Nim, foreign-exchange strategist at Australia and New Zealand Banking Group.

According to a Bloomberg report, Global investment firms, including Aberdeen Investments, MetLife Investment Management and Gamma Asset Management, have warned that a prolonged geopolitical crisis could drive the rupee into triple digits against the dollar.

“The rupee remains vulnerable to further depreciation, and 100 against the dollar is an important psychological threshold,” said Rajeev De Mello, global macro portfolio manager at Gamma Asset Management.

Amid mounting pressure, economists expect policymakers to consider additional measures to protect foreign exchange reserves and contain capital outflows. Citigroup economists said India could tighten overseas investment norms for domestic firms, accelerate repatriation of export earnings and encourage greater foreign borrowing by banks.

In a move aimed at easing liquidity pressures, the RBI on Wednesday announced a $5-billion buy/sell swap auction for a three-year tenor on May 26. Analysts said the measure would help maintain comfortable banking system liquidity while moderating pressure on forward premiums as the central bank continues intervening in the currency market.