MUMBAI, Monday, October 6, 2025, The Indian rupee low persisted on Monday, opening near 88.74 to the US dollar, propped up by Reserve Bank of India (RBI) intervention rupee banks IPO support amid hedging pressures and foreign outflows. Traders eye controlled depreciation after last week’s record close at 88.7725, with inflows from major listings set to test stability.
This Indian rupee low underscores broader vulnerabilities in South Asia’s largest economy, where currency swings ripple through remittances, import costs and regional trade ties. A sustained depreciation could inflate fuel prices across the subcontinent, strain household budgets in neighbouring nations reliant on Indian goods, and prompt coordinated policy responses from bodies like SAARC to shield cross-border flows.
RBI Intervention Rupee Banks IPO Support Bolsters Currency
The Reserve Bank of India has ramped up efforts to stabilise the rupee, focusing on offshore markets to curb sharp falls. On October 3, the RBI reference rate stood at 88.7775 for the US dollar, reflecting minimal daily variance from the previous session’s close of 88.7725. This rate, sourced from official archives, marks a slight easing from September 30’s low of 88.81, when the currency first breached psychological barriers.
Interbank dealers report frequent RBI intervention rupee banks IPO support through non-deliverable forwards (NDF), where short positions swelled to $5.8 billion in August from $2.5 billion in June. Such moves averted spot market drains that plagued liquidity in late 2024. “The mismatch in hedging flows has become quite pronounced,” noted an FX sales person at a private sector bank. “Exporters are holding back, expecting the rupee to weaken further, while importers continue to buy whenever the opportunity arises.”
Official data from the RBI’s October 1 monetary policy statement highlights rupee resilience despite volatility. The currency ranked among the least volatile in emerging markets, backed by foreign exchange reserves at $682 billion as of September 27. Remittances hit $35.3 billion in the first quarter of fiscal 2025-26, while the current account deficit narrowed to 0.2 per cent of GDP from 0.9 per cent a year earlier. These buffers enable targeted RBI intervention rupee banks IPO support without depleting core holdings.
Hedging Pressures Fuel Indian Rupee Low
Importers’ aggressive hedging against US trade frictions has exacerbated the Indian rupee low. With the dollar index at 98.02 and Brent crude at $65.5 per barrel, up 1.5 per cent, fuel import bills loom large. Exporters, betting on further slides, delay covers, widening the gap to $14.4 billion in one-to-three-month forwards by August.
Foreign portfolio investor outflows compounded the strain, totalling $2.7 billion from Indian equities in September. This exodus linked to US H-1B visa fee hikes, which curbed tech sector remittances a key forex earner. Net purchases on October 1 amounted to just $20.7 million in shares and $10.2 million in bonds, per NSDL figures, offering scant relief.
Tariff Headwinds from US Add to Strain
US tariff escalations on Indian imports, including electronics and textiles, triggered the latest rupee dip. Positions in NDFs surged post-announcement, prompting RBI to add shorts in August. The central bank peaked at $88.7 billion net exposure in February 2025, allowing maturities since amid stability between 86 and 87 to the dollar. Renewed pushes past 87 in August and 88 in September necessitated fresh RBI intervention rupee banks IPO support.
Gaura Sen Gupta, chief economist at IDFC First Bank, observed: “In August, the FPI outflows turned even more negative than the previous months, and RBI had to intervene to decrease the depreciation pressure on the rupee.” This approach sidesteps liquidity squeezes seen in December 2024, when spot sales flipped system funds negative.
IPO Inflows Offer RBI Intervention Rupee Banks IPO Support
Corporate fundraising provides a counterweight to the Indian rupee low. Tata Capital’s $1.75 billion share sale launched on October 6, drawing foreign bids amid yield hunts. LG Electronics India’s $1.3 billion IPO follows on October 7, potentially injecting $3 billion in dollar inflows this week.
Banks anticipate these will ease hedging mismatches, as fresh capital bolsters balance sheets. One-month NDF forwards traded at 88.91, with onshore premiums at 14 paise, signalling trader bets on gradual weakening. Yet, ten-year US note yields at 4.14 per cent keep pressure on, as global yields draw capital away.
The RBI’s neutral stance, with repo rate steady at 5.50 per cent, prioritises growth. GDP forecasts rose to 6.8 per cent for fiscal 2025-26, from 6.5 per cent, driven by 7.8 per cent first-quarter expansion. Inflation eased to 2.1 per cent in August, within the 2-6 per cent band, thanks to 10.5 per cent food price drops over nine months.
Background: Rupee’s Steady Descent
The Indian rupee low traces to post-election US policies in November 2024, when it first cracked 85 to the dollar in December. RBI interventions then stabilised it around 84-87 through mid-2025, but tariff hikes reignited slides. By September, it hit 88.80 on October 1, the all-time low before modest rebounds.
South Asia watches closely, as India’s currency anchors regional stability. Pakistan’s rupee, at 278 to the dollar, and Bangladesh’s taka face similar import squeezes, amplifying spillover risks. Robust services exports and remittances have cushioned India, but sustained Indian rupee low could hike regional energy costs by 5-7 per cent.
What’s Next for Indian Rupee Low
Traders forecast the rupee to meander near 88.80 this week, buoyed by IPO dollars but tested by ongoing hedges. RBI intervention rupee banks IPO support will likely persist, targeting volatility below 20 paise daily. If inflows exceed $2 billion, a pullback to 88.50 seems feasible; otherwise, probes toward 89 loom.
A forward-looking RBI may unveil rupee internationalisation steps, permitting local banks to lend abroad in rupees. This could diversify pressures, but success hinges on global uptake. For now, the Indian rupee low remains a litmus test for India’s external resilience.
Published in SouthAsianDesk, October 6th, 2025
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