The Indian rupee strengthened to around 94.9 per dollar, marking a four-week high, as easing US Treasury yields and reduced expectations of further Federal Reserve rate hikes lent support to the currency. This came alongside aggressive intervention by the Reserve Bank of India (RBI) and measures aimed at curbing dollar demand and speculative trading. US yields reversed an initial rise that followed stronger-than-expected September inflation data, while the perceived likelihood of an October Fed rate hike dropped from nearly 60% to below 25%.
The RBI has signalled its readiness to take additional steps to stabilise the rupee after raising interest rates by 25 basis points last week and intensifying its dollar sales. Even so, analysts warned that the outlook for sustained rupee appreciation remains uncertain, given India’s heavy reliance on energy imports, subdued foreign capital inflows, and ongoing portfolio outflows. Additional rate hikes and further policy adjustments remain among the tools under consideration to counter underlying pressures on the currency.
