The rupee reached its weakest closing level in over two months at 96.45
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims·
Currency volatility and FPI outflows: a key GS3 Economy topic regarding exchange rate stability.
Why in news
The Indian rupee hit its weakest closing level in over two months at 96.45 due to high dollar demand from oil companies and significant FPI outflows.
Background
Net FPI investments for the year reached $24.4 billion as markets anticipate a 25 basis points rate hike by the RBI.
Facts for Prelims
- FactForeign portfolio investors (FPI) withdrew $2.4 billion in October 2026
- FactNet FPI investments totaled $24.4 billion for the year so far
- BodyReserve Bank of India (RBI) is the central bank responsible for monetary policy and currency intervention
- FactThe rupee hit an all-time low of 96.96 in May
Prelims practice question
With reference to the Indian Rupee and FPI trends, consider the following statements:
- The rupee reached a closing level of 96.45 due to high dollar demand and FPI outflows.
- The rupee hit an all-time low of 96.96 in May.
- Net FPI investments for the year so far reached 34.4 billion.
Which of the statements given above is/are correct?
- (a)1 only
- (b)3 only
- (c)1 and 2 only
- (d)2 and 3 only
Show answer
Answer: (c) 1 and 2 only — Statements 1 and 2 are correct. Statement 3 is incorrect: The note states net FPI investments reached $24.4 billion.
For Mains
Q. Analyze the factors contributing to the volatility of the Indian Rupee and evaluate the role of the Reserve Bank of India in maintaining exchange rate stability.
Dimensions to cover in your answer
- External shocks: Impact of geopolitical tensions (US-Iran) on safe-haven asset preference and capital flight
- Monetary policy transmission: Correlation between RBI rate hikes and currency depreciation
- Trade dynamics: Influence of high dollar demand from energy-intensive sectors on forex reserves
Keywords: Exchange Rate · Foreign Portfolio Investment · Monetary Policy · Capital Flight · Forex Intervention · Safe-haven Assets
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.