The rupee clawed back from 96.79 per dollar to the mid 95s in recent days, aided by a series of central bank moves. The US Dollar/Indian Rupee spot last printed 95.055. Over the weekend the RBI rolled out steps that raise the cost of speculative rupee trades and curb the ability to rebook canceled FX derivative deals. It also created a dedicated window to meet, in full, the daily dollar demand from three government-run oil marketing companies, diverting those purchases from the spot market.
Back in June, the RBI launched the Foreign Currency Non-Resident (Bank deposit scheme to entice non-resident Indians to park foreign currency in Indian banks. By the time the window closed on Aug. 30, the program had lifted the RBI's foreign currency reserves by $105 billion.
Nomura wrote in a Saturday report that tough global conditions pushed the RBI into "aggressive" spot-market intervention to support the currency. Ambit Capital said the central bank's dollar sales to contain the rupee's slide led to a $51 billion drop in reserves as of Oct. 2. Ambit also noted that June's FCNR-B and related currency swaps created $200 billion in forward dollar commitments, effectively thinning the RBI's usable reserve cover. By its estimate, India's import cover is about 6.2 months, the leanest since the 2013 U.S. taper tantrum.
Since the FCNR-B window shut on Aug. 30, the rupee has weakened 1.9% against the dollar. Meanwhile, NSDL data indicate that foreign portfolio investors offloaded Indian equities worth $32.5 billion in the year to Oct. 13.
"The RBI is determined to do whatever is necessary to ensure orderly movement in the foreign exchange market," Reserve Bank of India governor Sanjay Malhotra told Moneycontrol on Tuesday.
Hanna Luchnikava-Schorsch, who leads Asia-Pacific economics at S&P Global Market Intelligence, said the RBI's actions will temper the rupee's slide, but won't "fully offset the fundamental pressures stemming from elevated oil prices, a wider current account deficit, and a challenging global capital flow environment." Her team sees the currency around 97 per US dollar by the end of 2026 and near 98 by mid 2027. She also noted that a move toward 100 per dollar could still occur if oil rises more, if portfolio outflows start up again, and if the current account deficit turns out larger than expected.
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Vishnu Varathan, who runs macro strategy for APAC at Mizuho Securities in Singapore, said the firm projects the rupee at 98 per dollar toward late 2026 and again in the early part of next year. At HDFC Securities, Devarsh Vakil, who serves as head of research, characterized the RBI's steps as "short-term to medium-term stability, not long-term structural support."
Harsimran Sahni, serving as Anand Rathi Global Finance's associate director and head of treasury, said the rupee is likely to stay under pressure through the financial year ending March 2027. "Businesses should strengthen their hedging strategies and stress-test their foreign currency exposures," he said, noting that interventions can smooth volatility but cannot correct external imbalances "indefinitely." He warned that if capital outflows persist alongside high crude and a wider current account deficit, the currency could edge toward 100 per dollar.
India remains the fastest growing major economy, but it imports about 85% of its fuel and is particularly exposed to supply risks stemming from the Iran war. The Strait of Hormuz was a key route for Indian supplies before the conflict. Elevated energy costs and record foreign investor exits from local markets have kept the currency on the back foot. Prime Minister Narendra Modi has even appealed to citizens to dial back foreign travel and avoid gold purchases to ease pressure on the rupee, repeating a similar request he made in May.
For anyone with currency-sensitive exposure - from imported goods to overseas tuition to travel budgets - the near term calm from the RBI's playbook is real, but the bigger forces driving the rupee are still in play. Forecasts from S&P and Mizuho, the reserve dynamics flagged by Nomura and Ambit, and the $32.5 billion in equity outflows are the signposts to watch.
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