Rupee hovers near record low of 96.97 as RBI's defences come under strain

The Indian rupee was trading within about 0.2 per cent of its all-time low of 96.97 per US dollar on Thursday, October 8, 2026, even though the Reserve Bank of India has deployed almost every tool it has to support it. The record low was set in May this year. In the past month the central bank has sold dollars heavily, raised its policy rate on October 7 for the first time in nearly four years, and drawn large dollar inflows through special deposit schemes, but high crude oil prices, rising global bond yields and foreign investors pulling money out of Indian shares have kept the currency under pressure. RBI Governor Sanjay Malhotra has said the rupee may be undervalued and that reserves remain adequate.

India imports most of the crude oil it uses, and oil is paid for in dollars. When prices stay high, importers need more dollars, which pushes the rupee down. At the same time, higher bond yields in the US and elsewhere make Indian assets less attractive to foreign investors, who sell shares and take dollars out. Both forces are working against the rupee now.

The RBI's response has been to fight on several fronts. Selling dollars from reserves slows the fall directly, but it uses up a finite stock, which is why the four-week drop in reserves is being watched closely. The rate hike makes holding rupees more rewarding and cools inflation, but it also raises borrowing costs at home. The deposit schemes bring in dollars quickly, but deposits can leave again and some of them come with future repayment commitments. Analysts argue that the more of these tools are used, the less each one seems to achieve, because the underlying pressure from oil and capital flows has not eased.

For households, a weaker rupee feeds into prices. Fuel, cooking gas, imported electronics, foreign travel and overseas education all become more expensive. For businesses, importers face higher costs while exporters, such as IT services and pharmaceutical firms, earn more rupees for each dollar of sales.

Short-term: The rupee could test or break its record low if oil stays high, and the RBI is likely to keep selling dollars to slow the move. September inflation data due next week will show how much the weaker currency and costlier oil are feeding into prices.

Long-term: A sustained period of a weak rupee would keep imported inflation high and could force further rate rises, slowing growth. Lasting relief depends mainly on lower oil prices and the return of foreign capital.

Who is affected: Families paying for fuel, foreign education or travel; importers and companies with dollar debt; exporters, who gain; and borrowers facing higher interest rates.

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