The rupee on Wednesday moved closer to the 97-mark, ending at a five-month low of 96.78, down 43 paise, despite the Reserve Bank of India’s rate hike and shift in policy stance to ‘calibrated tightening’ from ‘neutral’. The currency fell to 97.15 during the session, just 17 paise above its record low of 96.98.
The rupee was Asia’s worst-performing currency for the day despite the RBI’s relatively hawkish stance. The fall came even as RBI Governor Sanjay Malhotra said the currency remains undervalued based on the real effective exchange rate (REER) and assured that the central bank would ensure stability and an orderly movement of the rupee towards its correct value.
The rupee is down more than 7% so far this year, making it Asia’s second-worst performing currency in 2026. It had lost 9.9% in the previous fiscal. The currency has been battered by foreign portfolio outflows, elevated oil prices and rising global bond yields as central banks raise rates to combat inflation.
Asked why the rupee was still nearing the 97-mark despite an inflow of more than $145 billion from the RBI’s one-off policy measures, Malhotra said markets could be irrational in the short term but find their correct value over the long run.
“It is only in the long run they are able to find the right value,” he said, adding that the RBI would “ensure that the rupee stabilises” and “support an orderly movement of the rupee in finding its correct value” while ensuring there is no excessive volatility.
At the interbank foreign exchange market, the rupee opened at 96.37 and traded in a range of 96.34-96.84 before settling at 96.78, down 43 paise from the previous close.
Analysts expect the rupee to remain around current weak levels over the next three to six months, saying the RBI’s stance may not be hawkish enough to provide sustained support to the currency.
The rupee has remained under pressure despite persistent RBI intervention and the boost from inflows of more than $140 billion generated through the central bank’s one-off policy measures.
Some traders said the RBI was present in the spot market around the 96.55 level to prevent a sharper fall and keep the rupee from breaching the 97-mark.