MediumIV Macro Policy & Sovereign Debt8 October 2026, Thursday

Rupee slides to 96.88 per dollar despite rate hike

The Indian rupee lost 13 paise against the dollar on 8 October, closing at a provisional 96.88. The RBI's 25 basis point hike on 7 October failed to steady the currency, and reserves fell to 734.6 billion dollars as of 2 October.

Location: MUMBAI

Interbank data cited by ThePrint show the rupee opened at 96.71 on 8 October and closed 13 paise weaker than the previous day's 96.75. The dollar index rose 0.16% to 102.40 the same day, and Brent futures climbed 4.20% to 104.41 dollars a barrel. Foreign institutional investors were net sellers of 6,121.37 crore rupees on Wednesday. The Sensex fell 1,045.46 points to 71,593.24.

The Week reports that the RBI unanimously raised the repo rate by 25 basis points to 5.50% on 7 October, its first hike since February 2023. The policy stance shifted from neutral to calibrated tightening on a 4–2 vote. India's crude import cost averaged 114–116 dollars a barrel in September, and the RBI raised its fiscal 2027 inflation forecast from 5% to 5.2%.

According to a report carried by TradingView, a footnote in Governor Sanjay Malhotra's policy statement shows reserves falling for a fourth straight week to 734.6 billion dollars as of 2 October. Reserves peaked at 785.71 billion dollars on 4 September, so about 51 billion dollars has gone in less than a month. The figure comes from the footnote and may differ from the number in the RBI's weekly statistical supplement.

Talay assessment

Bottom line

With oil above 104 dollars and foreign outflows continuing, a 25 basis point hike was not enough on its own to support the rupee. The RBI is defending the currency with both rates and reserves; the loss of about 51 billion dollars in reserves shows what that defence costs. The most likely path is a managed depreciation of the rupee, with the RBI slowing its use of reserves.

Likely effects

India's import billNegativeWeeks
The rupee slid to 96.88 as oil rose to 104.41 dollars; the rupee cost of energy imports is rising through both channels at once.
Reserve bufferNegative1–6 months
If reserves keep falling by about 51 billion dollars a month, the RBI's capacity to defend the currency narrows and another hike comes into play.
Turkish exports to IndiaNegative1–6 months
A weak rupee dampens India's import demand and makes it harder for Turkish exporters to compete on rupee prices.

Possibilities, ranked

1
Managed depreciation55%
The rupee weakens gradually within a 96–98 band; the RBI scales back reserve sales and uses the forward market.
Watch: The RBI's weekly reserve data and USD/INR at 97
2
Further tightening30%
The rupee breaks above 97 for good and the RBI delivers a second hike or liquidity tightening in December.
Watch: RBI statements ahead of the December MPC meeting and September CPI
3
Oil eases, rupee recovers15%
Brent drops below 100 dollars and foreign outflows stop; the rupee moves back below 96.
Watch: Brent futures and foreign institutional investor flows

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Market reaction

Indicators affected

USD/INR close▼ 96.88
FX reserves (2 October)▼ $734.6bn
Brent futures▼ +4.20%

Historical context