Rupee Surges to 10 Week High on Dollar Deluge
3 Sept 2026 10:31 PM IST3 Sept 2026 10:31 PM IST
The inflows are expected to improve system liquidity ahead of the festive season, support banks' net interest margins and reduce pressure on domestic interest rates
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Mumbai: The Indian rupee on Thursday registered its largest single-day gain since July 27, driven by massive dollar inflows from the Reserve Bank of India’s special forex mobilisation scheme that reeled in $136.4 billion, far exceeding market expectations. Also, weakness in the greenback and steady oil prices provided vital secondary support to the rupee. The inflows are expected to improve system liquidity ahead of the festive season, support banks' net interest margins and reduce pressure on domestic interest rates.
The domestic currency opened strong at 94.30 per dollar and went on to touch an intraday high of 94.27 against the dollar, reaching its two-month high. It touched a low of 94.50 before closing at 94.48 per dollar, appreciating 0.51 per cent its highest level since June 25. The rupee’s previous close was 94.97 per dollar.
While traders expect the rupee to appreciate between 94.10 to 93.50 per dollar, they warn that a sustained rise in crude above $100/barrel, higher US yields or renewed geopolitical stress, could push USD/INR back towards 96 per dollar.
Says Kunal Sodhani, head -treasury at Shinhan Bank, “Higher-than-expected FCNR(B) inflows now at $127 billion, taking total special-scheme forex mobilisation to about $136 billion materially strengthens the RBI’s hand.”
“The RBI’s strategy is likely to shift from simply defending the rupee against depreciation towards active two-way management: continue selling dollars on sharp USD/INR rallies, but use the abundant dollar supply to absorb dollars on deeper dips, rebuild reserves and manage the forward-book exposure. The key is that the RBI now has considerably more flexibility to resist both excessive depreciation and excessive appreciation,” added Sodhani.
According to Anil Bhansali, head treasury at Finrex Trading Advisors, the RBI will be required to buy $ 216 billion in the coming months to cover short positions (essentially, obligations to deliver dollars later). Of the $ 216 billion, around $ 137 billion from the special forex schemes will be due in three to five years. In addition, the RBI’s open position is about $ 80 billion ($ 40 billion will be due in one year and another $ 40 billion beyond one year).
“We have to wait and watch what strategy RBI adopts to curb its shorts and also make the trade profitable,” added Bhansali.
Meanwhile the dollar index which gauges the value of the greenback against a basket of six major currencies weakened noticeably during the day falling to around 99.22 leading to an appreciation for most Asian currencies especially the Japanese yen, which carries significant weight in the dollar index basket.
( Source : Deccan Chronicle )
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