The Reserve Bank of India (RBI) intervened in the foreign exchange market to prevent the Indian rupee from slipping to a fresh record low, according to currency traders, as persistent dollar demand, elevated crude oil prices and global uncertainty continued to pressure the domestic currency. The intervention comes as the rupee remains close to its record low against the US dollar. The rupee closed at Rs 96.78 per dollar on October 8, 2026, after weakening amid concerns over foreign capital outflows, higher oil prices and the outlook for monetary policy. Traders said RBI activity helped limit further losses.
The central bank’s intervention highlights the challenges of managing exchange-rate volatility when external factors, including energy prices and global investor sentiment, remain unfavourable. India imports a substantial share of its crude oil requirements, making the rupee vulnerable to rising energy costs and the resulting demand for dollars. The RBI has indicated that it seeks to maintain orderly conditions in the foreign exchange market rather than defend a particular exchange-rate level. Governor Sanjay Malhotra has also described the rupee as undervalued, while noting that markets can behave irrationally in the short term.
Crude Oil Prices And Capital Outflows Add To Pressure
The rupee’s weakness reflects a combination of domestic and external factors. Elevated crude oil prices increase India’s import bill and raise demand for dollars, while foreign portfolio investor outflows can add to pressure on the domestic currency. Uncertainty surrounding geopolitical developments and global interest rates has further complicated the outlook. The RBI’s intervention has helped contain the pace of depreciation, but it cannot independently reverse the underlying pressures.
Market participants continue to monitor crude oil prices, movements in the US dollar and foreign investment flows for indications of the rupee’s next direction. The currency had traded near Rs 96.80 per dollar on October 9 before recovering, with traders attributing part of the movement to central bank intervention. The rupee subsequently closed at Rs 96.61 per dollar, up around 0.2 per cent on the day, as a softer dollar and a decline in oil prices provided additional support.
RBI Policy And Currency Outlook
The currency market is also assessing the implications of the RBI’s recent monetary policy decision. On October 7, the central bank raised the repo rate by 25 basis points to 5.50 per cent and shifted its policy stance from neutral to calibrated tightening. However, the move did not immediately strengthen the rupee, which remained vulnerable to external pressures and concerns over capital flows. A weaker rupee has different implications across sectors. Oil marketing companies, airlines and other businesses with substantial dollar-denominated expenses face higher costs, while information technology exporters may benefit from the translation of overseas earnings into rupees.
A sustained depreciation can also increase imported inflation if higher import costs are passed on to consumers. The RBI’s immediate challenge is to prevent excessive volatility without committing to a particular exchange-rate level. The currency’s trajectory will depend on the interaction between central bank intervention, crude oil prices, foreign capital flows and the broader movement of the US dollar.
