With reference to the Indian Rupee and FPI trends, consider the following statements: 1. The rupee reached a closing level of 96.45 due to high dollar demand and FPI outflows. 2. The rupee hit an all-time low of 96.96 in May. 3. Net FPI investments for the year so far reached 34.4 billion. Which of the statements given above is/are correct?

The rupee reached its weakest closing level in over two months at 96.45

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims· 7 October 2026

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.
FactThe rupee hit an all-time low of 96.96 in May.
BodyReserve Bank of India (RBI) is the central bank responsible for monetary policy and currency intervention.

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 managing external shocks.

Dimensions to cover in your answer

Capital flight: Impact of geopolitical tensions (US-Iran) on FPI behavior and safe-haven asset seeking.
Monetary policy trade-off: Balancing interest rate hikes to stabilize the currency against domestic growth objectives.
External shocks: Vulnerability of the rupee to global oil demand and fluctuations in the USD exchange rate.

Keywords: Foreign Portfolio Investment · Monetary Policy · Currency Depreciation · Capital Flight · Exchange Rate Volatility

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