INDIA RUPEE-RBI intervention shields rupee as surging dollar, persistent outflows drag

By Jaspreet Kalra

MUMBAI, Oct 5 (Reuters) - The Indian rupee held its ground against a broadly stronger dollar on Monday after the Reserve Bank of India stepped in to support the South Asian currency under pressure from persistent global headwinds and foreign outflows from local stocks.

The rupee was at 96.2650 per dollar by 11:00 a.m. IST, little changed from its previous close at 96.3150. Frequent market interventions by the RBI, including on Monday, have helped limit the rupee's volatility over the last few weeks.

Asian currencies fell across the board, with the Thai baht leading losses in the region, as weakness in the euro boosted the dollar index to its highest level since April 2025.

Fiscal worries in France amid a steep bond market rout have stoked fears of contagion risks in Europe, weighing down the common currency, which was down 0.6% against the dollar on Monday.

The focus this week will also be on the RBI monetary policy decision on Wednesday, where a 25-basis-point rate hike is widely expected. If delivered, the hike would be the RBI's first in nearly four years.

"We also expect the coming meet will seek to prepare markets for a hike to neutral in the 5.75-6.00% range by early FY28. We will therefore be watching language and tone in the upcoming policy around risks of having to raise rates above neutral," Tanay Dalal, an economist at Axis Bank, said in a note.

The RBI's key repo rate has been at 5.25% for around 10 months, and market participants reckon some pushback may be in store if the RBI elects to leave rates unchanged instead.

Markets are currently pricing a total of about 100 bps of hikes over the next 12 months.