The rupee fell to as much as 62.18 to a dollar and was last trading at 62.14/15. It had last closed at 61.81/82.
Bond yields surged as traders factored in the prospect of the third rate hike by Reserve Bank of India governor Raghuram Rajan.
The 10-year bond yield was up 7 basis points at 8.92 percent.
Sharply higher food prices drove up retail inflation to 11.24 percent in November from 10.17 percent in October, data released Thursday showed.