Rupee Slumps 0.52% to 96.31 as Oil Surge and FPI Outflows Trigger Sharpest Weekly Fall Since July

Mumbai, Oct 3: The Indian rupee had a rough week, ending at 96.3150 against the US dollar, its weakest closing level in more than two months. A sharp rise in crude oil prices, growing tensions between the US and Iran, continued foreign portfolio outflows and higher US Treasury yields weighed on the currency.

The rupee fell by 0.50 paise, or 0.52%, over the four trading sessions, compared with the previous week’s close of 95.8150. Indian markets remained shut on Friday, 2 October, for Gandhi Jayanti.

The pressure on the rupee was not limited to India. Several Asian currencies also weakened during the week. The dollar index rose to a two-month high of 101.2, while the 10-year US Treasury yield moved above 5.24%, approaching levels last seen nearly two decades ago.

Rupee Opens at 95.95 as Oil Prices and US Yields Weigh on Currency

The rupee opened Monday, 28 September, at around 95.95 per dollar, down 0.15% from the previous Friday’s close of 95.8150.

The currency came under pressure after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz. The development raised fresh concerns about possible disruptions to global oil supplies.

The rupee initially slipped to an intraday low of 95.89 before recovering some ground. Suspected intervention by the Reserve Bank of India (RBI) helped contain the fall. The currency eventually closed at 95.98, down 16 paise from Friday.

Traders were already cautious as the week began. The dollar index was trading near a two-month high, while crude oil prices remained above $105 a barrel after US-Iran diplomatic efforts broke down over the weekend.

Higher oil prices created another problem for the rupee. India imports most of its crude oil, so a sustained rise in oil prices can increase demand for dollars from Indian importers. That can put additional pressure on the domestic currency.

Rupee Falls Below 96 for First Time Since July and Touches 96.1475

Tuesday, 29 September, saw a sharper move in the currency market. The rupee slipped below the 96-per-dollar mark for the first time since July 2026.

The currency opened at 96.05, down 7 paise from Monday’s close of 95.98. It weakened further during the session and touched an intraday low of 96.1475, a fall of nearly 0.2%. The rupee recovered slightly towards the close but still ended the day at 96.13.

Higher crude oil prices added to the pressure. Brent crude climbed 2% to $107.40 a barrel, while the 10-year US Treasury yield rose by 6 basis points to 5.24%.

Market expectations around US interest rates also turned less favourable for emerging-market currencies. Traders were pricing in a nearly 70% chance of another US Federal Reserve rate hike in October, compared with less than 20% a month earlier.

The rupee’s move below 96 also prompted heavy dollar selling by state-run banks. Traders said the selling was likely on behalf of the RBI, as the central bank stepped in to prevent the currency from weakening too quickly beyond the key 96-per-dollar level.

Rupee Recovers 30 Paise to 95.83 as Crude Eases Below $103; Best Day of Week

Wednesday, 30 September, delivered the rupee’s strongest performance of the week, with the currency appreciating 0.16% to close at 95.83 per dollar, recovering from the near-96 level seen in morning trade as crude prices eased below $103 per barrel. The rupee opened the day at 95.95 and strengthened to 95.93 immediately, though the market saw higher dollar demand in late morning trades pushing the currency down to 95.9850.

Large public sector banks were seen selling dollars in bouts, possibly on the behest of the RBI, traders said, while broader gains across Asian currencies and a retreat in global bond yields provided additional support. The recovery proved short-lived, however, as foreign institutional investors sold ₹10,148 crore of Indian equities on that day alone, their biggest single-day outflow in nearly six months—keeping the rupee’s upside capped.

Rupee Plunges 48 Paise to 96.31 on 1 October as Global Bond Rout Deepens

Thursday, 1 October, marked the week’s sharpest single-day decline, with the rupee slumping 48 paise, or 0.5%, to close at 96.3150 per dollar, its weakest level in two months. The currency opened at 95.95, made a high of 95.89, and then lost ground steadily to touch an intraday low of 96.34 against the dollar. The sell-off was triggered by a deepening global bond rout, with US Treasury yields surging to decadal highs, while

Brent crude jumped 4.37% to settle at $102.31 per barrel following reports that the US was deploying a third aircraft carrier and up to 10,000 additional troops to the Middle East. Foreign portfolio investors sold another ₹9,484 crore of Indian equities on Thursday, taking the week’s cumulative FII outflows to approximately ₹35,000 crore. The rupee’s decline was partially cushioned by RBI intervention, with state-run banks spotted offering dollars in the spot market.

Euro, Pound, and Yen: Rupee Weakens Against All Major Currency Pairs

The rupee’s weakness was broad-based across major currency pairs. Against the euro, the rupee traded in a range of 108.71 to 110.31 during the week, reflecting the single currency’s own volatility against the dollar amid mixed eurozone economic data. The British pound-rupee pair moved between 127.00 and 128.30, with sterling finding support from hawkish Bank of England commentary.

The Japanese yen-rupee cross remained relatively stable, with the yen’s safe-haven appeal partially offset by the Bank of Japan’s continued dovish policy stance. The rupee’s weakness against all majors underscored the broad-based nature of the dollar’s strength and India-specific pressures, rather than isolated bilateral factors.

RBI Intervenes Daily Near 96; Forex Reserves Plunge $18.34 Billion

The Reserve Bank of India mounted a sustained defence of the 96-per-dollar level throughout the week, with state-run banks observed selling dollars on Monday, Tuesday, Wednesday, and Thursday—actions traders attributed to the central bank. The RBI’s intervention efforts drained liquidity from the banking system, with sell/buy dollar-rupee swaps soaking up an estimated $20 billion of excess rupee liquidity. The cost of this defence was evident in the forex reserves data: India’s foreign exchange reserves plunged $18.34 billion to $747.56 billion during the week ended 25 September, the third consecutive weekly decline and one of the sharpest drops in recent years.

The decline was driven by a $15.57 billion fall in foreign currency assets to $615.41 billion, as the central bank sold dollars to stabilise the rupee. Despite the drawdown, the RBI retained ample reserves to continue intervening, having built a buffer of $785.71 billion earlier in September through a special forex mobilisation scheme that attracted $133 billion in diaspora deposits.

FPI Outflows Hit ₹44,013 Crore in September; Oil Import Bill Adds $18,000 Crore

Foreign portfolio investors emerged as the week’s most persistent source of rupee weakness, selling Indian equities worth ₹5,353 crore on Monday, ₹9,980 crore on Tuesday, ₹10,148 crore on Wednesday, and ₹9,484 crore on Thursday—a cumulative weekly outflow exceeding ₹35,000 crore. For the full month of September, FII outflows reached ₹44,013 crore, pushing total foreign withdrawals from Indian equities in 2026 to ₹2.69 lakh crore, surpassing the entire ₹1.66 lakh crore outflow recorded in 2025.

The equity outflows were compounded by bond-market selling, with foreign investors dumping $1.1 billion of index-eligible sovereign bonds in September—the biggest outflow since March. On the trade front, elevated crude oil prices added roughly ₹18,000 crore to India’s annual import bill for every $1-per-barrel increase, with the Indian crude basket averaging $116.04 per barrel in September, up 28.66% from August’s $90.19.

Dollar Index Climbs to 101.2; Treasury Yields Near Two-Decade Highs

The US dollar index, which measures the greenback against a basket of six major currencies, climbed to 101.24 on 29 September, its highest level since late July, as the Federal Reserve’s first rate hike since 2023 continued to reverberate through currency markets. The 10-year US Treasury yield rose to 5.24%, near a nearly two-decade high, as rising oil prices fuelled concerns over stickier inflation and further Fed tightening.

The Bloomberg Dollar Spot Index was up 1.9% for September, on course for its best month since June, after the Fed raised rates to 3.75%–4.00% on 16 September and signalled further tightening through June 2027. The combination of higher US yields and a stronger dollar made dollar-denominated assets more attractive, drawing capital away from emerging-market currencies including the rupee.

The rupee ended the week at 96.3150 per dollar, down 0.52%, its weakest close since July, pressured by elevated crude oil above $100, sustained FPI outflows exceeding ₹35,000 crore, and US Treasury yields near 5.24%. The RBI’s daily intervention near 96 and forex reserves of $747.56 billion provided a partial cushion. Market participants will monitor the RBI policy decision on 7 October and US payrolls data for directional cues.