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The Indian rupee is likely to extend losses on Wednesday, weighed down by a further rise in oil prices, which would test the central bank's ability to cushion the currency.

The rupee is expected to open in the 94.84 to 94.86 range, per traders, having settled at 94.8175 to the dollar in the previous session.

The South Asian currency fell the most in nearly a month on Tuesday with the rise in oil prices countering the Reserve Bank of India's efforts to keep it anchored.

The RBI has used regular and, at times, forceful intervention in recent weeks to push the rupee higher, helping drive the currency to a two-month high late last week.

While the central bank was present in the market on Tuesday, traders said the intervention was not enough to prevent the rupee from weakening.

The decline marked a departure from the recent market action and could signal the RBI is becoming less inclined to support the currency aggressively when the underlying pressure is driven by oil, a currency trader at a bank said.

RBI may be increasingly mindful of using its FX reserves to push the rupee higher in an environment that is becoming more negative for the currency, he said.

"It will not be a surprise" if the rupee falls to 95, he added.

OIL HEADWINDS MOUNT

Oil prices rose for the fourth straight session after Iran launched fresh attacks on U.S. military assets in the Gulf. Worries over the war between Washington and Tehran spilling out across the region lifted Brent to $99.66 per barrel, the highest since late July.

Higher crude prices could strengthen the case for a Federal Reserve rate hike next week, adding to support for the dollar and leaving the rupee facing pressure from both higher import demand and a rise in U.S. Treasury yields.