RBI likely steps in as rupee hovers near 96 amid strong dollar and oil prices

RBI likely intervened on Monday

Four traders speaking to Reuters said the Reserve Bank of India stepped into the market on Monday, selling dollars via state‑run banks. The move appeared to hold the rupee at 96.24 per dollar, a slight uptick from its previous close of 96.3150. Traders noted that the dollar‑selling activity was “most likely on behalf of the RBI,” suggesting a coordinated effort to curb intraday volatility.

Dollar strength and oil prices add pressure

The rupee’s wobble came against a backdrop of a broadly stronger greenback – the dollar index was up 0.6% at 102.5, its highest level in more than a year – and oil prices hovering just above $100 a barrel. Brent crude futures were quoted at $101.34 a barrel, down 0.89% on the day, but still well above the $100 mark that has been feeding into India’s import bill.

Foreign fund outflows and falling reserves

Foreign Institutional Investors (FIIs) continued to sell Indian equities, off‑loading about ₹9,484.22 crore on Thursday, according to exchange data. The outflow added another layer of strain on the rupee, as capital leaves the market and demand for dollars rises.

RBI’s balance sheet shows a sizeable hit

Official data released on Friday showed India’s foreign‑exchange reserves had dropped by $18.34 billion in the week ended 25 September, settling at $747.56 billion. The decline reflects the central bank’s dollar‑selling operations and a prior week’s $14.88 billion fall.

Market reaction and upcoming policy moves

Equity markets opened on a positive note despite the currency pressure. The BSE Sensex was up 413 points at 72,315, while the NSE Nifty gained 131.55 points to 22,554.20 in early trade.

Analyst Anindya Banerjee, head of commodity and currency research at Kotak Securities, said the rupee “carries an upward bias for the pair within 95.50–96.50 on oil above $100, US yields at multi‑year highs and heavy foreign portfolio selling.” He added that a Federal Reserve hold decision in October and an RBI rate hike to 5.50% are already priced in.

Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, warned that “while we wait for RBI action on rupee, dollar buying by oil companies will continue while FIIs remain in sell mode.”

What’s next?

The RBI’s monetary‑policy committee meets later this week, with most economists expecting a 25‑basis‑point increase to 5.50%. Traders will be watching for any further dollar‑selling signals, as well as developments in Saudi Arabia that could push Brent higher.

The rupee’s ability to stay near the 96‑per‑dollar line will hinge on how the RBI balances market support with its dwindling reserves, and whether external shocks – from oil price swings to US monetary policy – intensify the current headwinds.