Rupee strengthens 1% to 95.83 against US dollar after RBI’s latest forex move; here’s what investors should know

Indian rupee appreciated its value against the benchmark US dollar by around 1% after the opening bell on Monday, October 12, as investors focused on the latest forex move from the Reserve Bank of India (RBI) easing pressure on the spot market, along with updates on tightening liquidity amid inflation concerns, adding further support to the domestic currency.

Data collected from TradingView showed that the Indian rupee spot price (USD/INR) strengthened around 1% to 95.83 apiece against the benchmark US dollar after the opening bell on Monday’s market, in comparison to 96.78 at the previous currency market close.

As of 9:24 am (IST), the USD/INR spot price was trading at 95.88 per US dollar, compared to the previous market close levels, as per the exchange data.

The domestic currency has strengthened around 0.5% against the US dollar in the last five sessions, but is still down nearly 3% of its value in the last six-month period. On a year-to-date (YTD) basis, the Indian rupee has lost 6.5% of its value due to the geopolitical crisis in West Asia sparking fear among emerging market bets.

Over the weekend, RBI announced fresh measures which added to the sentiment for the Indian rupee as the central bank launched a window for public sector oil marketing companies to purchase US dollars directly from it instead of relying on the spot market, which was adding pressure to the domestic currency.

As surging global oil prices make it expensive for import-heavy oil refiners to purchase raw crude in exchange for dollars, the latest measure will help the companies evade the volatility in the spot market while buying the greenback from the central bank.

What’s RBI’s window for public sector OMCs?

The Reserve Bank of India on Saturday, October 10, announced that the central bank is opening a ‘special window’ for public sector oil marketing companies (OMCs), namely Indian Oil, Hindustan Petroleum, and Bharat Petroleum, to meet their entire daily dollar needs in the upcoming period.

“Under the facility, the Reserve Bank will undertake sale of USD to the public sector OMCs through designated bank/s,” said RBI in its official statement.

The special window for the public sector OMCs will be effective from Monday, October 12, and will remain open until further notice.

Investors should note that this move means that RBI will now let the PSU oil companies purchase US dollars directly from the central bank to fulfil their dollar needs for import bills, steering the major energy importers away from the spot currency market and, in turn, reducing pressure on the domestic currency.

Data suggests that the Reserve Bank of India holds a total of ₹7.07 lakh crore or $734 million in foreign exchange reserves, out of which ₹5.82 lakh crore or $604 million are foreign currency assets, including US dollars, as of the week ended October 2, 2026.

Can RBI’s move support Indian rupee?

Experts from CLSA said that RBI’s move to tighten liquidity and the latest foreign exchange measures are likely to support the Indian rupee in the near term, potentially pushing it towards the 95 levels despite the geopolitical uncertainty.

The increased CRR mandate, combined with a ₹25,000 bond sale and the forex update, are the measures expected to support the Indian currency.

However, key factors like currency flows, along with crude oil prices, are expected to remain the key momentum drivers of the Indian rupee in the upcoming weeks.

₹25,000 crore bond sale plan

In a separate announcement on October 9, RBI unveiled its plan to tighten liquidity in the Indian market, aiming to conduct an open-market sale of ₹25,000 crore of Government of India securities or government bonds.

As per the official update, RBI will conduct an OMO sale auction to sell government bonds for an aggregate amount of ₹25,000 crore on October 13, 2026, through a multi-security auction using the multiple price method.

All investors looking to purchase government bonds should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 9:30 am and 10:30 am on October 13, 2026.

The results of the auction will be announced on the same day, and the successful bidders will have to ensure the funds for their bids by 12 noon the next day, October 14, 2026.

This comes at a time when the central bank estimates a 6% inflation rate in the third quarter (Q3) of FY27 due to continued supply-side pressure, El Niño conditions, and higher oil prices in the market.

Increased CRR limit

To further contain the liquidity scenario in the banking system, the Reserve Bank of India has also announced that the institutional lenders need to maintain 99% of the required cash reserve ratio (CRR) every day starting from October 16, 2026.

The banks are currently mandated to hold up to 90% of the required CRR. The impact of this move on the currency market is expected to be that the central bank will prevent speculative trading of the domestic currency due to the increased cost of Rupee funding in the market.

This move comes after the central bank reviewed the liquidity conditions in the Indian banking system, and the update aims to reduce liquidity, which stood at a surplus of around ₹3.88 lakh crore rupees as of the data released on October 8.

CRR is a percentage of reserves that banks need to keep in cash with the central bank to ensure stability of the banking system. These funds cannot be used to carry out investment or lending activities to customers, acting more like a failsafe in times of requirement of immediate liquidity.