Rupee Slips to 96.72 Despite RBI Rate Hike; Oil and FII Outflows Test Record Low

Mumbai, Oct 10: The Indian rupee ended the week marginally stronger at 96.72 per US dollar, recovering from a five-month low of 96.88 touched on Thursday, 8 October, as a softer dollar and easing crude oil prices provided late relief. For the full week, the rupee weakened from its Monday opening of 96.20, closing 0.54% lower against the greenback.

The currency remained within striking distance of its all-time low of 96.96, hit in May, despite the Reserve Bank of India’s first repo rate hike in nearly four years on 7 October. Persistent foreign portfolio outflows, elevated crude oil above $100 per barrel, and the RBI’s own hawkish policy statement kept the rupee under sustained pressure throughout the five trading sessions.

USD/INR Opens at 96.20, Closes at 96.72; Weekly Range Spans 96.20 to 96.88

The USD/INR pair opened the week at 96.20 on Monday, 5 October, and closed at 96.72 on Friday, 9 October, representing a weekly depreciation of approximately 52 paise or 0.54%. The weekly high of 96.88 was recorded on Thursday, 8 October, while the weekly low of 96.20 was touched during Monday’s opening session. The rupee’s strongest trading day was Friday, when it appreciated 16 paise to close at 96.72, supported by a slight softening in the US dollar index and retreating crude oil prices. The weakest session was Thursday, when the currency depreciated 13 paise to close at 96.88, its weakest level in five months.

On a daily basis, the rupee opened at 96.20 on Monday, touched an intraday low of 96.31, and closed at 96.30, down 5 paise from the previous close of 96.25. On Tuesday, 6 October, the currency opened at 96.29 and weakened to 96.39, down 4 paise, as firm crude oil prices and continued FII selling weighed on sentiment.

Wednesday, 7 October, saw the rupee open marginally higher at 96.45 before falling as much as 96.83 during the day, eventually closing at 96.78, its second-weakest close on record, after the RBI announced its rate hike. Thursday brought further weakness, with the rupee depreciating 13 paise to close at 96.88. Friday provided relief, with the rupee opening at 96.74, touching an intraday high of 96.51, and closing at 96.72, up 16 paise.

Rupee Weakens Against Euro, Pound; Gains Marginally Versus Yen

The rupee’s performance against other major currencies reflected the broader dollar strength and domestic pressures. Against the euro, the EUR/INR pair opened the week at approximately 108.11 on Monday, with the euro trading at its lowest level against the rupee since early October. By Friday, 9 October, the EUR/INR pair traded in a range of 108.45–108.99, with the euro recovering slightly as French government bond yields declined. For the week, the rupee weakened approximately 0.8% against the euro.

Against the British pound, the GBP/INR pair opened at approximately 127.89 on Monday, with the pound buying 127.8932 rupees. By Friday, 9 October, ICICI Bank quoted the GBP at 124.83 for buying and 124.95 for selling, indicating that the pound had weakened against the rupee during the week. Against the Japanese yen, the JPY/INR pair opened at approximately 0.6095 on Monday, with one yen buying 0.6095 rupees, and closed at approximately 0.6110 by Friday, reflecting a marginal appreciation of the yen against the rupee.

Crude Above $104 and FII Outflows of ₹12,944 Crore Keep Rupee Under Pressure

The week’s dominant driver of rupee weakness was the surge in global crude oil prices. Brent crude crossed $105 per barrel on Thursday, 8 October, as attacks on oil tankers in the Strait of Hormuz triggered supply-disruption fears. With India importing over 85% of its crude requirements, elevated oil prices directly increase the country’s import bill and dollar demand from refiners, widening the trade deficit and pressuring the rupee. The rupee weakened in tandem with rising crude prices through Wednesday and Thursday before recovering on Friday when Brent retreated to $102.93.

Also Read: How to invest in crude oil 

Foreign portfolio outflows compounded the pressure. Foreign institutional investors sold equities worth ₹12,943.58 crore on a net basis on Thursday, 8 October, the second-largest single-day outflow of 2026. On Monday, FIIs offloaded ₹9,484.22 crore, and on Wednesday they sold ₹6,121.37 crore. This sustained selling forced importers and foreign investors to buy dollars, increasing demand for the greenback and pushing USD/INR higher.

The US Dollar Index (DXY) traded at 102.09 on Friday, down 0.04%, after touching a yearly high of 102.18 on Monday. The dollar’s resilience, despite fading October Fed rate-hike odds, reflected independent euro weakness and relative resilience in the Federal Reserve’s rate path. Rising US Treasury yields, with the 10-year yield at 5.28% — its highest level since 2002 — further supported the dollar by attracting capital flows into US assets.

RBI Intervenes via State-Run Banks as Rupee Nears Record Low of 96.96

The Reserve Bank of India actively intervened in the foreign exchange market throughout the week to prevent the rupee from testing its all-time low of 96.96, hit in May. On Friday, 9 October, state-run banks were spotted offering dollars right before the local spot market opened, most likely on behalf of the RBI, according to three traders who spoke to Reuters. The central bank had been a regular presence in the FX market over the preceding several sessions.

The RBI’s intervention was confirmed by market participants rather than official announcements. Traders reported that state-run banks sold dollars near the 96.80–96.85 level on Wednesday and Thursday, providing a crucial cushion that prevented the rupee from breaching the record low. On Friday, the rupee opened steady at 96.78 against the dollar after the RBI’s intervention helped the currency recover intraday. RBI Governor Sanjay Malhotra stated on 7 October that the central bank would support an “orderly movement” of the rupee and ensure it finds its “correct value” while preventing excessive volatility.

India’s foreign exchange reserves fell for a fourth consecutive week to $734.606 billion as of 2 October, down $12.952 billion from the previous week, according to RBI data released on 9 October. The drawdown reflects the RBI’s intervention in the foreign-exchange market, including dollar sales to smooth the rupee’s decline and sell/buy FX swaps aimed at absorbing surplus liquidity. The reserves have declined about $50 billion from their record high of approximately $785 billion hit in September.

RBI Hikes Repo to 5.50% on 7 October; Stance Shift to Calibrated Tightening

The RBI’s Monetary Policy Committee on Wednesday, 7 October, unanimously raised the repo rate by 25 basis points to 5.50%, its first rate hike since February 2023, and shifted its stance to calibrated tightening by a 4:2 majority. The central bank also raised its FY27 CPI inflation forecast to 5.2% from 5% earlier, citing rising food prices, elevated crude oil, and a weakening rupee. The rate hike was intended to anchor inflation expectations and support the currency by making rupee-denominated assets more attractive.

However, the immediate market reaction was adverse for the rupee. The currency fell as much as 96.83 during Wednesday’s session before closing at 96.78, as traders assessed the implications of the hawkish stance. The rate hike narrowed the negative real interest rate gap but did little to stem outflows, as the differential between Indian and US policy rates remained unfavourable.

The rupee’s slide continued on Thursday despite the rate hike, indicating that global factors — crude prices and dollar strength — were more powerful drivers than domestic monetary policy during the week.

Rupee’s Weekly Fall Despite Rate Hike Reflects Structural Pressures

The rupee’s weekly decline of 0.54% despite the RBI’s rate hike underscored the structural pressures facing the currency. India’s trade deficit with China crossed $112 billion during the fiscal year, while the overall merchandise trade deficit remained elevated at approximately $30.43 billion in September. Elevated oil prices above $100 per barrel widened the import bill, and persistent FII outflows — crossing ₹4.41 lakh crore in 2026 — continued to exert downward pressure on the currency.

The International Monetary Fund suggested that India allow the exchange rate to act as a “shock absorber” as tighter US monetary policy contributes to tighter global financial conditions. Rising US Treasury yields narrowed the India-US yield spread to approximately 200 basis points, limiting the scope for portfolio inflows. The rupee has been among the worst-performing Asian currencies, losing about 7% year-to-date, with analysts expecting it to remain near record lows over the next three to six months.

The rupee’s weekly performance was defined by the interplay of elevated crude prices, sustained FII outflows, and the RBI’s dual role as inflation-fighter and currency-stabiliser. The central bank’s intervention near 96.96 has established a near-term floor, while the rate hike to 5.50% signals a commitment to currency stability. Key variables to monitor include the trajectory of Brent crude above $100 per barrel, the pace of FII outflows from Indian equities, and the rupee’s movement relative to the US dollar index and Treasury yields.