The Indian rupee weakened on Thursday as oil prices rose and domestic stocks gave up their early gains. The currency had started the day on a firmer note, helped by a pickup in foreign portfolio inflows, but that support faded.
The rupee closed at 94.0425 against the dollar, down 0.4% from its previous close of 93.69. Earlier in the session, it had climbed to a peak of 93.62, its strongest level since April.
Foreign investor inflows bring dollars into the market, which tends to support the currency. This time, however, the rupee gave back its gains once oil turned higher and local shares, which had been up during the day, ended roughly flat.
Strong dollar demand from a state-run lender added to the pressure in the afternoon. Several other public sector banks were also seen offering dollars near the 94 mark, which limited the rupee’s chances of recovering.
Traders are now focused on India’s October consumer inflation data, due at 4 p.m. IST on Thursday. Elevated oil prices could slow economic growth and push up inflation. Higher oil prices and a weak monsoon have also added to cost pressures in the country.
Markets are pricing in nearly 100 basis points of policy rate hikes by the Reserve Bank of India over the next 12 months. Economists polled by Reuters expect headline consumer inflation to have risen 5.93% last month, close to the upper limit of the central bank’s inflation tolerance band.
Analysts at Goldman Sachs, in a note, said they expect three more 25 basis point rate hikes from the RBI over its next three meetings. They said this would take the policy rate to 6.25%, which is less tightening than the roughly 100 basis points the INR OIS market is currently pricing in over the next year.
Higher policy rates make it more expensive to bet against the rupee, which discourages speculative positions. Expectations of tighter policy and better inflows have improved sentiment on the currency. According to a Reuters poll, bearish bets on the rupee have fallen to their lowest level since June 2025.