The Indian rupee strengthened by around 1% to 95.83 against the US dollar on Monday, October 12, 2026. This rise followed the Reserve Bank of India's (RBI) latest foreign exchange move, which eased pressure on the rupee in the spot market. Investors welcomed the RBI's announcement as it supports the domestic currency amid ongoing inflation concerns and tightening liquidity.
- The rupee appreciated from 96.78 at the previous close to 95.83 against the US dollar.
- RBI opened a special forex window for public sector oil marketing companies to buy dollars directly from the central bank.
- RBI plans to tighten liquidity by selling government bonds worth ₹25,000 crore on October 13, 2026.
- Rupee support is expected despite geopolitical uncertainties and inflation pressures.
What caused the rupee to strengthen against the US dollar?
The rupee's appreciation is mainly due to the Reserve Bank of India's new forex policy. On October 10, 2026, RBI announced a special window allowing public sector oil marketing companies (OMCs) such as Indian Oil, Hindustan Petroleum, and Bharat Petroleum to buy US dollars directly from the central bank. This move helps these companies meet their daily dollar needs for imports without relying on the spot currency market, reducing demand pressure on the rupee.
How does the special forex window work?
Under the special window, RBI sells US dollars directly to the public sector OMCs through designated banks. This facility started on October 12, 2026, and will remain open until further notice. By enabling OMCs to access dollars directly from RBI, the central bank reduces the need for these companies to purchase dollars from the open market, which helps stabilize the rupee's value.
What other measures is RBI taking to support the rupee?
Besides the special forex window, RBI announced plans to tighten liquidity in the market. On October 9, 2026, RBI revealed it would conduct an open market operation (OMO) sale of government bonds worth ₹25,000 crore on October 13, 2026. This sale aims to absorb excess liquidity and control inflationary pressures.
Investors interested in purchasing these government bonds must submit bids electronically through RBI's E-Kuber system on October 13 between 9:30 am and 10:30 am. Successful bidders must ensure funds are available by noon on October 14, 2026.
What is the current state of RBI's foreign exchange reserves?
As of the week ending October 2, 2026, RBI held foreign exchange reserves totaling ₹7.07 lakh crore (approximately $734 million). Of this, ₹5.82 lakh crore (about $604 million) are foreign currency assets, including US dollars. These reserves provide RBI with the capacity to intervene in the currency market to stabilize the rupee.
What factors will influence the rupee’s movement going forward?
Experts expect the rupee to remain supported near the 95 level due to RBI's measures. However, currency flows and crude oil prices will continue to be key drivers of the rupee's momentum. Inflation pressures, partly due to supply-side constraints and higher oil prices, remain a concern. RBI estimates inflation at around 6% for the third quarter of fiscal year 2027.
Frequently Asked Questions
Q: Why did RBI open a special forex window for oil companies?
A: RBI opened the special window to allow public sector oil companies to buy US dollars directly from the central bank. This reduces their need to purchase dollars from the spot market, easing pressure on the rupee.
Q: How does RBI’s bond sale affect the rupee?
A: The bond sale absorbs excess liquidity from the market, helping to control inflation and support the rupee's value.
Q: What is the significance of RBI’s foreign exchange reserves?
A: RBI’s reserves enable it to intervene in currency markets to stabilize the rupee when needed.
