Indian Rupee Hits Lowest on Record

The Indian rupee fell to around 95.25 per dollar, extending losses near a two-week low as fading foreign inflows weighed on the currency. Support from inflows linked to the Jio Platforms IPO and position unwinding is expected to fade following the share allotment, leaving the rupee more exposed to persistent foreign portfolio outflows. High energy prices also remain a key risk, as Brent crude climbed above USD 117 a barrel to a six-month high amid supply concerns after Houthi attacks on Saudi Arabia, keeping India's import costs elevated and potentially prompting importers to hedge further. Meanwhile, the Reserve Bank of India continues to cushion depreciation through market intervention, including dollar sales, and a special dollar window for state-owned oil refiners that redirects their purchases away from the regular spot market. Despite recent weakness, the rupee remained set for a roughly 0.6% gain in October.

The Indian rupee fell to around 95.0 per dollar, retreating from multi-week highs as rising oil prices and a global flight to safety weighed on the currency, while persistent dollar demand added to downward pressure. Brent crude climbed to nearly USD 115 a barrel amid concerns over supply disruptions following Houthi attacks on Saudi Arabia, raising India’s import costs and potentially prompting further hedging by importers. The decline ended the rupee’s eight-session rally, which had lifted the currency to a more than six-week high near 94.30. Meanwhile, market participants had digested preliminary economic indicators showing India's manufacturing PMI eased to 54.9 in October from 55.1 in September, while the services PMI rose to 56.2 from 55.2, marking a four-month high. Although the RBI’s recent foreign-exchange measures have curbed dollar demand and provided some relief, underlying pressures from elevated oil prices and capital outflows continue to threaten the rupee’s recovery.

The Indian rupee strengthened to around 94.4 per dollar, reaching its highest level since early September, as Reserve Bank of India intervention, inflows related to the Jio Platforms IPO, and the unwinding of long-dollar positions in the non-deliverable forward market supported the currency. The rupee extended its winning streak to eight sessions, recovering more than 2% after nearing record lows earlier this month, following RBI measures to redirect oil-related dollar demand away from the spot market and raise the cost of certain importer hedges. Strong institutional demand for the Jio IPO and foreign banks' dollar selling further supported the rally, while a break below the 94.70 level encouraged additional position unwinding. However, elevated oil prices remained a downside risk, as higher crude costs could widen India’s import bill and increase demand for dollars.