Dubai: The infighting between India’s central bank and federal government has had a collateral damage on an already ailing rupee.

Indian rupee resumed its downward slide on Wednesday on reports that the Reserve Bank of India’s governor Urijit Patel made calls for greater autonomy to the central bank.

“The current political conflict between the government and the central bank does not inspire confidence in the rupee. The dispute sheds light into the unique relationship that the Indian government has with the banking system,” Zaid Alasad, Chief Investment Officer, Harbour Wealth Management said.

The finance ministry started interfering by asking the central bank to cut interest rates to prop-up the economy, which was beaten down due to demonetisation and implementation of the Goods and Services Tax (GST), at a time when inflation was high. The rift was out in the open when Viral Acharya last week called for greater autonomy to the central bank.

The Indian rupee touched a low of 74.1450, the lowest since October 15, before closing 0.38 per cent lower at 73.955. The fall was restricted due to stable prices of brent crude, which traded half a per cent higher at $76.31 (Dh280.3) per barrel.

In the equity markets, the benchmark BSE Sensex index closed 1.63 per cent higher by 551 points at 34,442.05. The 10-year benchmark bond yield rose to 7.87 per cent from its previous close of 7.83 per cent.

The rupee, which has been the worst performing Asian currency, hit an all-time low of 74.4825 on October 9.

In the immediate to medium term, analysts expect more weakness in the Indian rupee.

“Capital outflow, demand for USD and the approaching regional elections are factors that are putting pressure on the Indian Rupee. It is likely that the Rupee could touch the 75 mark against the dollar in the coming weeks,” Sudhesh Giriyan, Chief operating officer at Xpress Money Services Ltd.

According to Alasad, “in the absence of a historical precedent, markets tend to gravitate to round numbers, and 80 would be our next target.”