Rupee declines as crude oil prices and FII outflows weigh on early trade

The Indian rupee weakened by 4 paise to 96.39 against the U.S. dollar in early trading on Tuesday, October 6, 2026. This decline was driven by rising crude oil prices and persistent foreign institutional investor (FII) outflows. However, gains in domestic equity markets and a slightly weaker dollar index helped limit further depreciation.

At the interbank forex market, the rupee opened at 96.29 but quickly dropped to 96.39, marking a 4-paise loss from its previous close. On Monday, the rupee had closed at 96.35, down 10 paise from the prior session.

Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted that the Reserve Bank of India (RBI) has been defending the rupee around the 96.33 level. However, strong demand for dollars from foreign portfolio investors (FPIs) and oil companies has persisted despite a drop in Brent crude prices to $100.63 per barrel and a decline in the dollar index to 102.12.

The RBI's Monetary Policy Committee began a three-day meeting on Monday, October 5, with expectations of a 25-basis-point rate hike. This aligns with central banks' hawkish stance amid rising inflation risks due to escalating conflict in West Asia. The last repo rate hike was in February 2023, when the RBI raised it to 6.50%. The current policy repo rate stands at 5.25%.

In the domestic equity markets, the Sensex climbed 120.22 points to 72,535.41, while the Nifty rose 47.15 points to 22,603.10. Meanwhile, FIIs sold equities worth ₹4,699.14 crore on a net basis on Monday, according to exchange data.