The Indian Rupee is expected to trade in the range of 95.30 to 96.80 in October 2023. This forecast is due to strong foreign exchange reserves and trade agreements, while rising global yields and the exit of foreign investors put pressure on the Indian currency.
Rupee Fluctuations in September
The Indian Rupee experienced fluctuations in September and faced a tendency to depreciate. In this context, strong inflows into the Reserve Bank of India's (RBI) Non-Resident Deposit Scheme led to an increase in foreign exchange reserves and strengthened the Rupee to 94.26 against the dollar in the first week. However, the strengthening of the dollar index due to rising Federal Reserve interest rates and the increase in oil prices from $90 to $110 per barrel in the first half of September worried the currency market and led to a depreciation of the Rupee to 96.15 by the end of September.
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Exit of Foreign Investors and Its Impact on the Rupee
The exit of foreign investors (FPI) also negatively impacted the Rupee. In September, net withdrawals from Indian stocks and bonds reached approximately $5.9 billion. Specifically, equities alone faced an outflow of $3.8 billion, reversing the trend; while in July and August, foreign investors had collectively injected $7 billion into Indian markets. So far in the fiscal year 2026-27, FPIs have withdrawn over $21 billion from Indian markets.
The Rupee was also supported by inflows from FCNR(B) and foreign exchange reserves. Actions taken in June up to September 18 led to an inflow of $143.5 billion, which included about $133 billion through FCNR(B) deposits, significantly supporting the Rupee. Foreign exchange reserves reached $765.9 billion, covering approximately 11.2 months of goods imports.
The Reserve Bank of India also conducted forex buy/sell operations in the futures market to withdraw excess Rupee liquidity from the system. This action contributed to the strengthening of the USD/INR futures.
Overall, a 25 basis point increase in interest rates in October 2026 and one or two additional hikes for the remainder of the fiscal year 2026-27 are expected to be considered as effective factors on the Rupee's status. At the same time, the existence of trade agreements, rising oil prices to $100, and strong foreign exchange reserves are considered supportive factors for the Rupee. The Reserve Bank of India has predicted that the Rupee will trade sideways in the range of 95.30 to 96.80 in October.
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