The Indian rupee climbed 10 paise to 96.65 against the US dollar on Thursday, likely aided by Reserve Bank of India (RBI) intervention. While the move offers short-term relief, the currency remains under pressure from high oil prices, heavy foreign institutional selling, and a shrinking foreign exchange reserve pile.
The Indian rupee saw a marginal recovery in early trade on Thursday, October 8, 2026, gaining 10 paise to reach 96.65 against the US dollar. The currency had opened at 96.71, improving slightly from the previous session's close of 96.75. This uptick is widely attributed to tactical intervention by the Reserve Bank of India (RBI), which has been selling dollars to curb excessive volatility and prevent a sharper depreciation.
While the RBI's presence in the foreign exchange market provides a temporary floor, the rupee continues to face stiff headwinds from global and domestic factors. The US Dollar Index (DXY), which tracks the strength of the dollar against a basket of currencies, remains elevated near 102.25. Additionally, the cost of oil is weighing heavily on the currency, with Brent crude trading around $102 per barrel. Since India is a major importer of crude oil, higher prices increase the demand for dollars, creating persistent pressure on the rupee.
Investors are also observing the significant decline in India’s foreign exchange reserves. Since the peak in September 2026, when reserves stood at $785.71 billion, they have contracted by approximately $50 billion to reach $734.6 billion. This reduction highlights the cost of defending the currency, as the central bank uses these reserves to stabilize the forex market. Market participants are closely tracking how much more the RBI is willing to utilize its reserves to manage the exchange rate without impacting macroeconomic stability.
Adding to the uncertainty, foreign capital is moving out of domestic equities. On Wednesday, Foreign Institutional Investors (FIIs) were net sellers, offloading shares worth Rs 6,121.37 crore. This capital flight has dragged down domestic stock indices, with the BSE Sensex retreating to 72,408.15 and the NSE Nifty50 falling to 22,507.65. The recent decision by the RBI to raise the repo rate by 25 basis points to 5.50% and shift to a policy of calibrated tightening has also contributed to a cautious sentiment among equity investors, as higher interest rates can increase borrowing costs for businesses.
Moving forward, the primary factors for investors to monitor include the central bank's stance on currency volatility, the trajectory of global crude oil prices, and the trend of foreign institutional flows. The stability of the rupee in the coming weeks will likely depend on whether global inflationary pressures ease and if FIIs return as net buyers in the Indian equity markets.