On Monday, the rupee weakened past 43 per dollar to a one-month low, after oil hit a record above $143 a barrel and the local share market shed 2.5% on its way to posting its biggest monthly fall in 16 years. The local currency fell as far as 43.1150 per dollar, its lowest since May 22, when it hit a 13-month low of 43.21. It ended at 43.0250/03, down 0.3% from Friday’s close of 42.875/885 and taking its losses in 2008 to 8.4%.

“High oil prices, losses in the stock market, and high offshore rates put pressure on the rupee,” a senior dealer with a private bank said. One-month offshore non-deliverable forward contracts were quoting at 43.41/51, 0.9% weaker than the onshore rate.

Dealers said the central bank was seen selling dollars through state-run banks at around 43.10 per dollar, helping the rupee stop its fall and then recover some of its losses. Oil rose to a record of $143.67 a barrel, propelled by heightened tensions between Israel and Iran over Tehran’s nuclear programme.

Meanwhile, bond yields rose towards seven-year highs on Monday, on expectations record oil prices would cause a spike in inflation and that cash conditions may tighten and squeeze funds available for investment.

The 10-year bond yield ended at 8.69%, off an intra-day peak of 8.78% but up from Friday’s close of 8.58%.

Volumes were low at about Rs 1,110 crore on the central bank’s trading platform.

“Sentiment is very nervous that if inflation crosses 12%, the RBI could raise rates again,” a trader with a foreign bank said. Annual wholesale price inflation rate rose to 11.42% in mid-June, the highest in more than 13 years.

Sentiments are bearish also because the central bank will auction Rs 10,000 crore of bonds on July 4.

Call money rate ended off lows because some banks stepped up borrowing towards the end of trade on Monday, dealers said. The two-day call rate ended at 8.40-8.60% compared to 8.70-8.75% Saturday. Earlier, call money rate had slipped to 6%, as demand waned. CBLOs had also touched an intra-day low of 1%. Demand was low on Monday because most banks have over-borrowed last week, dealers said. Call market volume was at Rs 15,500 crore, down from Rs 19,900 crore Friday.

RBI injected Rs 22,800 crore through repo, lower than Friday’s Rs 32,100 crore.