The Indian rupee is expected to trade sideways in October in a range of 95.30–96.80, as robust forex reserves and trade agreements provide support, while rising global yields and foreign portfolio investor outflows weigh on the currency as per a report by Union Bank of India.
 
The Indian rupee remained volatile with a slight depreciation bias in September. At the same time, strong inflows under the Reserve Bank of India’s (RBI) Foreign Currency Non-Resident (Bank) FCNR(B) deposit scheme pushed foreign exchange reserves to an all-time high of USD 785.71 billion, helping the currency strengthen to 94.26 against the dollar in the first week.

“However, subsequent strength in Dollar Index due to Fed raising rates, oil prices moving from USD 90/barrel to USD 110/barrel levels in the first fortnight of September worried the FX market on BoP concerns, which led to Rupees depreciation towards 96.15 levels by the September end,” it noted highlighting Rupee finally closed at 95.83/USD in September month.
 
At the same time, foreign portfolio investor (FPI) outflows also weighed on the rupee, with net withdrawals from Indian equities and bonds at around USD 5.9 billion in September.
 
Equities alone saw outflows of USD 3.8 billion, reversing the trend seen in July and August, when overseas investors pumped a combined USD 7 billion into Indian markets. So far in FY27, FPIs have pulled out more than USD 21 billion from Indian markets, it noted.
 
Rupee was also supported by FCNR (B) inflows and FX reserves. The June measures attracted USD 143.5 billion in inflows by September 18, including about USD 133 billion through FCNR(B) deposits, providing support to the rupee. Forex reserves stood at USD 765.9 billion, covering about 11.2 months of goods imports.
 
“RBI carried out FX Sell/Buy operations in forward market to drain excessive Rupee liquidity from the system. This pushed USD/INR forward premiums higher,” it further noted.
 
The lender expects “25 bps rate hike in Oct’26 followed by one or two additional hikes during remainder of FY27.”

Overall, as per the lender, “Various trade agreements, oil prices getting back to 100 levels, robust FX reserves will help Rupee in October, however, rising yields across the globe, and FPI outflows can dent outlook for Rupee.”
 
“We expect Rupee to trade sideways in October, and in a range of 95.30-96.80,” it said.