Policy steps to redirect oil-company purchases and tighten hedging rules lifted the rupee 1% in October, its strongest gain since February.

MoneyTurkey Currencies Desk | 1 November 2026

Key points

• The rupee closed at 94.95 per dollar on Friday, up from 95.26 the prior session, for a 1% monthly advance.
• RBI net short dollar forward position reached a record $239.2 billion in September.

The Indian rupee posted its best monthly performance in eight months after the Reserve Bank of India redirected oil companies’ dollar purchases away from the spot market and tightened hedging rules. The currency closed at 94.95 per dollar on Friday, up from 95.26 the previous session, for a 1% gain in October. The move came as the central bank’s net short dollar forward position hit a record $239.2 billion in September and foreign-exchange reserves fell for a seventh straight week to a more than two-month low.

What happened

The rupee strengthened 1% month-on-month to close at 94.95 per dollar, its strongest gain since February. The currency had traded near its record low of 96.96 in May before the RBI’s October measures took effect.

The central bank supplied dollars directly to public oil marketing companies and tightened rules on currency speculation. The 12-month dollar-rupee forward premium rose more than 120 basis points in October, increasing the cost of hedging future dollar payments.

Foreign-exchange reserves fell for a seventh consecutive week, reaching their lowest level in more than two months. The RBI’s net short dollar forward position stood at a record $239.2 billion at the end of September.

What is driving the currency

The RBI delivered its first rate increase in nearly four years in October and signalled further hikes, even as policymakers remain cautious about an aggressive tightening cycle. The finance ministry said the measures would buffer the exchange rate and mitigate imported inflation.

Elevated oil prices and persistent portfolio outflows continue to pressure the rupee. Analysts at Goldman Sachs noted that higher oil prices may weigh on the current account, but healthier capital-flow dynamics and the RBI’s policy tools should keep the currency range-bound.

The RBI’s steps to redirect oil-company dollar purchases and curb speculation helped the rupee outperform most Asian peers in October. The central bank also took earlier measures since March to attract capital inflows and cool dollar demand.

Why it matters

A stronger rupee reduces imported inflation pressures for India’s economy. The finance ministry said the RBI’s actions will help offset the impact of high oil prices on domestic costs.

The record short forward position and falling reserves show the scale of the RBI’s intervention to support the currency. Traders will watch whether the central bank maintains these measures as oil prices remain elevated.

The rupee’s outperformance relative to other Asian currencies in October demonstrates the effectiveness of the RBI’s targeted steps. Market participants will monitor the forward premium and reserve trajectory for signs of further policy adjustments.

What to watch

• RBI forward book size and reserve data next week
• Oil price moves and their impact on current-account gap
• Portfolio flow data for signs of renewed outflows
• Any further RBI guidance on rate path

For information only. Not investment advice.

Sources

• Reuters: https://www.reuters.com/world/india/rupee-benefit-dollar-retreat-plunging-us-yields-oil-surge-tempers-impact-2026-10-30/
• Reuters: https://www.reuters.com/world/india/indias-fx-reserves-dip-seventh-straight-week-hit-over-two-month-low-2026-10-30/
• Business Standard: https://www.business-standard.com/economy/news/rbi-s-net-short-dollar-forward-position-hits-record-239-2-bn-in-september-126110100730_1.html
• Business Recorder: https://www.brecorder.com/news/40446683/indian-rupee-posts-best-month-in-eight-on-rbi-measures-to-curb-dollar-demand