Mumbai: The Indian rupee is navigating turbulent waters as it hovers near its all-time low of 88.80 against the U.S. dollar. The Reserve Bank of India (RBI) has been actively defending this critical level, but persistent dollar strength and heavy importer demand are testing the central bank’s resolve. On Thursday, the rupee settled at 88.7825, with one-month non-deliverable forwards indicating an opening in the 88.78–88.80 range on Friday.
The dollar’s rally, driven by political instability in Europe and Japan, pushed the dollar index to a two-month high. Weak risk sentiment and rising U.S. yields further fueled the greenback’s momentum. This surge has intensified pressure on the rupee, as importers particularly from the oil and jewelry sectors continue to seek dollars aggressively, keeping the RBI vigilant.
Market analysts note that while the RBI has put a floor under the rupee, sustained hedging interest and limited exporter flows present ongoing challenges. Portfolio inflows have offered little respite, and any minor dip in USD/INR triggers renewed demand, emphasizing the fragile balance in India’s foreign exchange market.
Asian currencies displayed mixed reactions to the dollar’s rally, highlighting broader regional vulnerabilities. Key market indicators show the one-month non-deliverable rupee forward at 88.94, the onshore one-month forward premium at 14.25 paise, Brent crude futures at $65.3 per barrel, and the ten-year U.S. Treasury yield at 4.14%. Foreign investors remain active in Indian markets, purchasing $83.1 million in shares and $117.5 million in bonds on October 8, signaling continued but selective confidence in the Indian economy.
As the rupee faces persistent headwinds, the RBI’s ability to maintain stability near the psychologically significant 88.80 level will remain under close scrutiny in the coming sessions.