Why is the Indian rupee expected to extend its decline, and what are the two main drivers cited in the news?

The Indian rupee is expected to extend its decline due to two primary drivers: a sharp rally in oil prices—specifically Brent crude, which surged over 6% on Thursday and approached $110 a barrel amid intensifying Middle East shipping route attacks—and rising U.S. Treasury yields, which climbed after stronger-than-expected U.S. inflation data (a 0.4% rise in the producer price index) heightened expectations of a Federal Reserve rate hike, pushing the 10-year yield near 5%.

How has the Reserve Bank of India's recent intervention in the foreign exchange market been affected by current market conditions?

The Reserve Bank of India had previously supported the rupee—helping it rally from near 95.70 to a two-month high of 94.30—buoyed by strong deposit inflows from overseas Indians; however, the RBI now appears increasingly reluctant to intervene aggressively against the rupee’s weakness, as traders note 'little point in supporting the rupee aggressively when the negative forces are this intense', with oil-driven external balance pressures and surging U.S. yields undermining prior gains.

Rupee to Extend Slide Amid Oil Rally and Surging US Yields

Sep 10, 2026

The Indian rupee faces further decline as Brent crude surges near $110 per barrel and U.S. Treasury yields rise, prompting the Reserve Bank of India to limit aggressive currency support amidst heavy oil import reliance.

reuters

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