Rupee weakens past 96 against US dollar as oil prices, foreign outflows weigh

The rupee weakened past the 96-per-dollar mark in early trade on Tuesday, September 29, 2026, as elevated crude oil prices and persistent foreign fund outflows continued to pressure the Indian currency.

At the interbank foreign exchange market, the rupee opened at 96.03 and then fell to 96.13 against the US dollar, a decline of 16 paise from its previous close. On Monday, September 28, the rupee had settled at 95.97 against the American currency. The move took the rupee past the 96 level, which traders track closely because it can influence sentiment and import costs.

Forex traders said the rupee was under pressure largely because of a combination of firm oil prices and rising US nominal and real yields. Higher US yields can draw portfolio flows away from emerging markets, including India, as investors look for better returns in dollar-denominated assets. India imports most of its crude oil, so costlier oil also weighs on the rupee by increasing demand for dollars to pay for energy imports.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the rupee could test 96.50 in the coming days. A clear break above 96.50 could open the door towards 98, he said, adding that major support was now at 95.50. Banerjee also noted that the domestic picture remained a source of strength. Industrial output grew 8% in August, and the Reserve Bank of India has completed a large programme of bond sales this month with strong demand, which helps keep the adjustment orderly.

In global markets, the dollar index, which measures the greenback's strength against a basket of six currencies, was trading at 101.23, higher by 0.04%. Brent crude, the global oil benchmark, was trading higher by 1.51% at $106.87 per barrel in futures trade amid concerns over disruptions to crude supplies through the Strait of Hormuz.

Domestic equity markets also opened lower. The Sensex fell 503 points to 72,260.09 in early trade, while the Nifty dropped 151 points to 22,626.50. Foreign Institutional Investors offloaded equities worth ₹5,353.22 crore on a net basis on Monday, according to exchange data.

The rupee's movement is closely watched because it affects the cost of imports, including oil, and can influence inflation. A weaker rupee makes imports more expensive and can also affect the returns of foreign investors. At the same time, it can benefit exporters by making Indian goods cheaper in overseas markets. The Reserve Bank of India monitors the currency market and may intervene to curb excessive volatility, though it does not typically target a specific exchange rate.

Traders said they would continue to watch oil prices, US bond yields and foreign fund flows for fresh direction. The rupee's near-term path is likely to depend on how these global factors evolve, along with domestic economic data and the central bank's actions. The 96-per-dollar mark is being watched as a key psychological level, but market participants cautioned that daily moves can be volatile and should not be read as a long-term trend on their own.