MUMBAI, March 4 (Reuters) - The Indian rupee weakened past the 76 per dollar mark on Friday to touch its lowest level since mid-December, as the deepening crisis in Ukraine pushed Asian shares toward 16-month lows, with traders watching out for potential central bank intervention.
The partially convertible rupee was trading at 76.16/17 per dollar by 0820 GMT, after touching 76.1750 - its lowest since Dec. 17. The currency had closed at 75.91 on Thursday.
Traders said after the initial fall in the dollar/rupee, importers and banks rushed to purchase the greenback amid the ongoing geopolitical risks.
Most emerging Asian currencies and stocks weakened on Friday amid heightened investor anxiety after reports that Russian forces had attacked a nuclear plant in Ukraine.
"Markets are going to be volatile until the war concludes. With oil still holding up, expectations of higher inflation have climbed. Rupee is likely to move in tandem with Asian peers unless RBI intervenes," a senior forex trader at a private bank said.
Oil prices rebounded as fears of Western sanctions that could disrupt Russian oil exports outweighed the possibility of more Iranian supplies.
India imports more than two-thirds of its oil needs and the surge in crude threatens to push up the country's trade and current account deficit and pressure the rupee.
"We now expect CPI inflation to average at 5.1% in FY22-23 compared with 4.5% previously," said Rahul Bajoria, an economist with Barclays.
"The surge in international commodity prices, especially crude oil, is a key source of concern. If international crude prices stay at the current $110/bbl levels, we expect domestic pump prices to increase at least 20% over the coming months."
Traders said the central bank had been selling dollars sporadically via state-run banks around 75.70 to 75.90 levels in recent sessions, to prevent sharp depreciation in the rupee.
India's benchmark 10-year bond yield was trading down 1 basis point on the day at 6.82%.
Reporting by Swati Bhat; Editing by Sherry Jacob-Phillips