New Delhi, Oct 4: The Indian rupee is expected to remain largely stable against the US dollar in October and trade in the 95.30–96.80 range, on the back of robust foreign exchange reserves and trade agreements, even as rising global yields and continued foreign investor outflows pose risks, ANI reported citing a research report by the Union Bank of India.
The rupee remained volatile in September and ended the month at 95.83 per US dollar. It had strengthened to around 94.26 in the first week; due to strong inflows through foreign currency deposits and India's record foreign exchange reserves. India's forex reserves touched an all-time high of USD 785.71 billion, according to the report. The strong reserves provide a cushion against external pressures and support the rupee.
However, the currency came under pressure later in September as crude oil prices rose sharply from around USD 90 to USD 110 per barrel during the first half of the month. Higher oil prices can put pressure on the rupee as India imports a large share of its crude oil requirements. Rising import costs increase demand for dollars and can widen concerns over the country's external payments, the report said.
Foreign investor withdrawals also weighed on the rupee. Foreign portfolio investors (FPIs) withdrew around USD 5.9 billion from Indian stocks and bonds in September, including nearly USD 3.8 billion from equities, the report said.
This marked a reversal from July and August, when foreign investors had invested around USD 7 billion in Indian markets. So far in FY27, FPI outflows from Indian markets have crossed USD 21 billion.
Meanwhile inflows through the Reserve Bank of India's Foreign Currency Non-Resident (Bank) FCNR(B) deposit scheme provided support to the currency. Measures introduced in June attracted USD 143.5 billion in inflows by September 18, of which around USD 133 billion were through FCNR(B) deposits.
As per the research report by Union Bank, strong forex reserves, trade agreements and oil prices moving towards USD 100 per barrel could support the rupee in October. However, rising global yields and continued FPI outflows could limit its gains. Overall, the lender expects the rupee to remain broadly stable and trade within the 95.30–96.80 range during October. (With ANI inputs)
