The Indian rupee maintained a tight trading range near the 96-per-dollar threshold during early market activity on Monday, grappling with persistent headwinds from elevated crude oil costs and continued foreign portfolio investment exits. Interventions by the Reserve Bank of India (RBI) helped temper sharp swings throughout the session.
Key Points
- The rupee held steady near 96 against the US dollar, weighed down by rising global oil prices and ongoing foreign fund withdrawals.
- RBI measures softened intraday fluctuations, although India’s foreign exchange reserves recorded another sharp decline.
- Market participants expect a 25-basis-point policy rate increase from the central bank later this week amid continued FII equity sales.
- Global currency pressures—particularly from firm US Treasury yields and dollar momentum—continue to challenge the rupee’s near-term trajectory.
Mumbai, Oct 5 (PTI) — The rupee opened at 96.20 and dipped slightly to 96.26 against the US dollar in early trading on Monday, marking a marginal loss compared to its prior close. Trading remained constrained within a narrow band around the critical 96-level throughout the morning session.
According to forex market analysts, periodic interventions by the Reserve Bank of India stabilized volatility and prevented steeper intraday losses. However, structural concerns such as soaring energy import bills and unrelenting greenback strength continued to erode investor confidence.
On Thursday, the rupee breached the symbolic 96-per-dollar level, closing at 96.25—its weakest reading in over two months. Indian financial markets remained closed on Friday in observance of Mahatma Gandhi Jayanti.
“The rupee closed at its lowest in more than two months and retains an upward bias for USD/INR within the 95.50–96.50 range, especially with oil prices above $100 per barrel, US yields climbing to multi-year peaks, and sustained foreign portfolio selling,” noted Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.
The central bank has intensified its market support operations, and data released Friday revealed that India’s official foreign exchange reserves declined by approximately $18.34 billion to roughly $747.56 billion for the week ending September 25. This follows a prior-week drop of about $14.88 billion, underscoring the magnitude of recent defense activity.
The upcoming monetary policy committee meeting remains a focal point for traders. Markets are largely pricing in a 25-basis-point rate hike to 5.50%, which would mark the latest attempt to stabilize inflationary pressures without derailing growth momentum. Beyond domestic developments, key global catalysts include upcoming US services sector data, the Federal Reserve’s policy minutes, and potential updates regarding supply disruptions in Saudi Arabia.
“As we await the RBI’s next move, dollar demand from oil market participants is expected to persist while FIIs are likely to maintain their cautious stance,” said Anil Kumar Bhansali, Treasury Head and Executive Director at Finrex Treasury Advisors LLP.
In parallel, equity indices showed early-session gains despite broader macroeconomic uncertainty. The Sensex climbed 413 points to reach 72,315, while the Nifty 50 advanced 131.55 points to trade at 22,554.20.
Data from Indian exchanges confirmed that Foreign Institutional Investors sold off equity positions worth Rs 9,484.22 crore on a net basis on Thursday.
Meanwhile, the dollar index—a gauge of greenback strength against a basket of major currencies—stood at 102.47, representing a 0.54% uptick. Global benchmark Brent crude futures slipped 0.89% to $101.34 per barrel during Asian trading.
