The Indian rupee appreciated by 19 paise on Friday, September 25 and was last seen at 95.80 against the US dollar.
The Indian rupee might have been able to stay above the psychological mark of 96; however, despite pressure from many sides, it closed at par for the week.
On Thursday, the Indian rupee rallied from the weekly low of 95.9550 and the range of 95.57-95.9550.
The Indian Rupee (INR) - 0.3%, closed at 95.8725 last week.
Various factors acted as hurdles for the currency throughout the week.
Gains made by the rupee in the Friday session were limited by the US dollar demand by local importers, higher oil prices, and the strong dollar resulting from aggressive signals from the Federal Reserve.
The dollar index remained resilient at 101 during the week, which was yet another downside factor for the emerging currencies.
Underpinning the strength of the dollar lies an important policy change coming out of Washington.
The US Federal Reserve hiked interest rates by 25 basis points to 3.75-4.00%, in a unanimous decision of 12-0, on September 16. More hikes are likely to come according to statements made by the officials.
In response to this, the likelihood of another hike in October increased to 68-70%, from only 55% the previous day, which has helped maintain the dollar’s strength while weakening emerging market currencies like the rupee.
There were two very particular things that provided relief to the rupee through the course of the week.
The decline in prices of Brent crude oil below the level of $106 reduced some of the stress on the import bills of India.
There was also some hope about the possible US-Iranian dialogue that would provide some sort of solution to the standoff at the Strait of Hormuz.
However, the central bank didn’t just rely on the market to defend the rupee.
The Reserve Bank of India intervened in the currency markets through its dollar sales and sell-buy transactions as part of what is known as the $10 billion swap campaign.
According to reports, the central bank was reportedly selling dollars at levels of 95.80 on Friday, just like when the RBI was consistently preventing the currency from falling below that level mid-August.
The forex traders have noted that these levels are important technical signals for the path of the rupee in the coming days.
Below 95.80 would mean poor technical conditions for the rupee, with this leading to another round of dollar buying, as 96 is the next psychological level, as per a forex trader at a bank.
Any movement beyond 96 would mean further depreciation of the rupee—which is why the RBI's defense of the level in August and September is noteworthy for the market observers.
Apart from all of the above factors, the continuous outflow of FPIs in the past few weeks has created additional drag during the month.
During the week, there was an outflow of roughly $600 million in net FPIs, taking total outflows for September to $3.1 billion.
Cumulative outflows so far for the year have touched $19 billion, which is a significant figure.
Friday’s close is indeed an improvement compared to where the rupee was not long back, within the month.
Not long back, the rupee had dipped below the level of 95 per dollar for the first time in almost two weeks to 95.23 before closing at 95.11, with Brent oil crossing $100 per barrel and the rupee weakening 4.34% from the beginning of the Iran war.
This dip too had triggered intervention by the RBI through the sale of dollars on the spot market, with the market pointing out that the poor response to the 30-day variable rate reverse repo operation from RBI had made the need for selling dollars even more compelling, as lenders had reportedly suggested to RBI in a meeting some weeks back.
It is not an isolated case—the rupee has had this as its defining characteristic all through 2026.
High prices of crude oil associated with the ongoing Strait of Hormuz standoff have seen the rupee flirt with record low levels at multiple instances in the year, with the RBI intervening through dollar selling and swap arrangements each time the situation became critical.
New Houthi strikes against Saudi Arabia and deadlocked negotiations between Gulf States and Iran have ensured that the possibility of a full-blown conflict keeps crude prices—and consequently the rupee—volatile.
