Rupee weakens to 97.15 against US dollar, lowest level since May 20; RBI raises interest rates to 5.50%

The Indian rupee weakened to 97.15 against the benchmark US dollar during the trading session on Wednesday, October 7, hitting its lowest level since May 20, 2026, as investors focused on the Reserve Bank of India’s monetary policy meeting outcome amid global headwinds and higher dollar demand in the market.

During Wednesday’s market, the Indian currency weakened to its day’s low level of 97.15 against the global currency due to the elevated demand for the greenback in the global market amid heightened market uncertainty.

Investing.com data showed that the Indian rupee was trading 0.62% weaker at 96.98 apiece against the benchmark US dollar as of 10:15 am (IST), compared to 96.39 apiece at the previous currency market close.

In its October monetary policy outcome, the Reserve Bank of India (RBI) decided to raise its key interest rates by 25 basis points to 5.5%, from earlier 5.25%, while changing its stance to a “calibrated tightening” from “neutral”.

RBI’s move to increase its key benchmark rates comes for the first time since February 2023, as the central bank aims to counter rising inflation in the economy, which has been hovering over its 4% tolerance band upper limit.

In the case of the Rupee, RBI’s monetary policy tightening can potentially support the currency by increasing the attractiveness of domestic assets to foreign investors with the elevated rates in the market, drawing in capital inflows.

RBI Governor Sanjay Malhotra also said that the central bank will ensure that the Indian rupee stabilises to find its correct value and the Reserve Bank will keep supporting the currency in an orderly movement.

Rupee weakens 4% in 6 months

Data showed that the Indian rupee has weakened more than 4% against the benchmark US dollar in the last six months amid the geopolitical conflict in West Asia, which has kept global market investors on edge, driving the demand for safe-haven assets.

In situations of elevated risk or uncertainty, global investors are likely to pull money out of emerging market bets like the Indian rupee to shift their investments into the safe-haven US dollar, in turn, powering the demand for the benchmark currency.

The data also showed that the Indian rupee has weakened 1.7% in the last three months, and 2.2% in the last one-month period, against the US greenback.

Investing.com data further showed that the US dollar spot index was trading 0.24% higher on October 7 at 102.07 as of 10:28 am (IST), compared to 101.83 at the previous currency market close, indicating higher dollar demand in the market.