The rupee was at 82.42 to the dollar by 10:44 a.m. IST compared with 82.2250 in the previous session. The currency is headed for a third straight session of losses.
"It would be safe to assume that this turnaround was not an outcome that was considered by most," a forex salesperson at a bank said.
"What it means is that you will now have importers who will rush to hedge and traders who have to manage their positions."
Asian currencies struggled after the U.S. Federal Reserve's minutes of the June policy meeting showed officials favoured additional rate hikes this year.
While the Fed had opted for a pause at the June meeting, the minutes revealed that some members could have supported a 25 basis points increase.
"The key element to the June FOMC minutes seems to be that 'almost all' officials thought more tightening would be needed this year," ING Bank said in a note.
U.S. yields marched higher and equities dropped. Tracking the U.S. yields and the higher USD/INR, rupee forward premiums dropped.
The 1-year premium declined to 1.3350 rupees, the lowest in more than a decade. The 1-year implied yield declined to near 1.60%.
The dollar index, supported by the Fed rate outlook, reached a high of 103.46 in Asian hours. The Thai baht led losses among Asian currencies, falling 0.7%.
U.S. private payrolls and ISM services print is due Thursday, and will provide more cues on the labour market and a key segment of the economy.
(Reporting by Nimesh Vora; editing by Eileen Soreng)
By Nimesh Vora
