Rupee sinks to 96.43 as RBI rushes in — and the worst may not be over

MUMBAI: The Indian rupee ended Tuesday at 96.43 against the US dollar, down 8 paise, after the Reserve Bank of India likely stepped into the foreign exchange market to slow the currency's slide, traders told Reuters. The rupee had touched 96.43 in early trading — a two-month low — before state-run banks were spotted offering dollars, most likely on behalf of the RBI. The central bank was also likely conducting dollar-rupee sell/buy swaps to drain excess cash from the banking system, four traders said. The June 2027 dollar-rupee forward premium rose eight paise to 2.56 in response. The intervention, traders stressed, was about smoothing the fall, not defending a line. The pressures are relentless: a stronger dollar, with the dollar index above 102; US 10- and 30-year Treasury yields at fresh 24-year highs; Brent crude near $100.60 a barrel; and persistent foreign selling of Indian assets. The scale of corporate anxiety is now measurable. Indian companies booked a record $77 billion in currency hedges in September, up more than 80 per cent year-on-year, as importers and borrowers rushed to protect themselves. Foreign institutional investors offloaded equities worth 4,699.14 crore rupees on Monday alone, and have pulled nearly $29 billion out of Indian equities this year — despite official data describing India as the world's fastest-growing major economy. A Reuters poll of 35 currency strategists, conducted from September 30 to October 5, expects the rupee to languish near these levels for months: around 96.10 in three months, weakening to 96.50 by end-March, and a record low of 97.50 a year from now. The rupee has weakened roughly 1 per cent a month through 2026; at that pace it would cross the psychologically significant 100-per-dollar mark within six months. Asked whether 100 would already have been breached without the RBI's heavy interventions, Anil Bhansali of Finrex Treasury Advisors said it "should have happened in June". All eyes are now on the RBI's monetary policy committee, whose three-day meeting began on Monday. Markets widely expect a 25-basis-point repo rate hike on Wednesday — the first since February 2023 — with further tightening of 50 to 75 basis points over the next 12 to 15 months, as growth runs hot, crude stays expensive, and the currency bleeds. For ordinary Indians, the arithmetic is simple and cruel: a weaker rupee makes fuel, cooking oil, electronics and foreign education costlier. The central bank can sell dollars and raise rates, but it cannot sell confidence — and the outflows suggest the world is not buying.