Rupee Falls as Oil Prices and Foreign Outflows Weigh

The Indian rupee weakened by 5 paise on Monday, closing at 96.30 against the US dollar. This decline was driven by rising oil prices and ongoing foreign investment outflows, keeping the rupee near the critical 96-level mark. Traders noted that while risk-on sentiment provided some support, attention is now focused on foreign capital flows and the Reserve Bank of India's upcoming monetary policy decision for further direction.

In the interbank foreign exchange market, the rupee opened at 96.20 but fell to an intraday low of 96.31 before settling at 96.30, down 5 paise from its previous close. Earlier this week, the rupee had dropped below the key 96-per-dollar level, closing at 96.25 on Thursday. Markets were closed on Friday for Mahatma Gandhi Jayanti.

Analysts expect the rupee to consolidate between 95.95 and 96.50 in the near term, with a potential bias for further gains. The Reserve Bank of India's Monetary Policy Committee began a three-day meeting on Monday and is likely to raise rates by 25 basis points, aligning with a hawkish stance due to rising inflation risks from the escalating conflict in West Asia. The last repo rate hike was in February 2023, when the rate was raised to 6.50%, and it has since been cut to the current 5.25%.

Meanwhile, the dollar index rose by 0.25% to 102.18, and Brent crude increased by 0.22% to $102.48 per barrel. On the equity front, the Sensex gained 472.77 points to close at 72,382.47, while the Nifty rose by 133.80 points to 22,555.75. Foreign Institutional Investors sold equities worth ₹9,484.22 crore on Thursday. Additionally, India's forex reserves fell by $18.343 billion to $747.557 billion in the week ended September 25.