New Delhi

The Indian rupee is expected to trade in the range of 94.75-95.75 against the US dollar in the near term, with crude oil prices likely to play a major role in determining its movement, according to a report by Bank of Baroda (BoB).

The report said the rupee faced increasing external pressures in October 2026 due to higher global oil prices, rising global yields and continued foreign portfolio investor (FPI) outflows.

It said, "Higher oil prices are a major factor which will determine the trajectory of INR going forward. Overall, we expect INR to trade in the range of 94.75-95.75/USD in the near-term." 

Against this backdrop, the Indian currency depreciated sharply at the beginning of the month and hovered around its lifetime low. To check the steep fall, the Reserve Bank of India (RBI) announced measures to support the rupee in the spot market, including a separate dollar window for oil marketing companies (OMCs), while also taking steps to curb speculative trading activity.

Following these measures, the rupee staged a strong recovery, gaining over 2 per cent. However, elevated oil prices, volatility in global financial conditions, a stronger dollar and continued FPI outflows put renewed pressure on the currency.

Despite the challenges, the rupee ended October 2026 with a gain of 0.9 per cent. The report said the currency had shown resilience, largely due to support from the RBI.

The report noted that in the short term, the rupee's movement is likely to be driven more by market sentiment than by fundamentals.

Volatility in global financial conditions, narrowing yield differentials, risk aversion, FPI outflows and higher oil prices are expected to weigh on the currency. It added that the risks remain tilted towards further depreciation pressure on the rupee.

However, the RBI's measures have provided some support to the currency and signalled the central bank's commitment to ensuring that exchange rate movements remain orderly and range-bound.

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"RBI measures provided a timely boost to the INR, while also signalling to the markets that the central bank is committed towards ensuring that the movement in exchange rate remain orderly and range bound. This is likely to continue to work in favour of the INR, barring any fresh external shocks," the report said.

The report added that while the central bank's measures have provided a marginal boost, the outlook for the rupee will largely depend on external factors, particularly the movement in global oil prices.