The rupee held steady near 96 against the US dollar at the start of the week. The USD-INR pair traded flat at 95.82 in the latest session. On October 1, the rupee had touched 96.31, a two-month low.

The currency has weakened about 6 per cent this year. The slide raises the cost of imports for India. The country imports about 90 per cent of its crude oil needs.

Brent crude has averaged above 100 dollars a barrel. A weaker rupee adds to imported inflation through fuel and input costs. The Reserve Bank of India has been defending the currency for years.

It is now under pressure to back that defence with a rate hike. The monetary policy committee meets from October 5 to 7. A majority of economists in a Reuters poll expect a 25-basis-point hike.

That would take the repo rate to 5.50 per cent. It would be the first increase since February 2023. Inflation rose to 4.82 per cent in August.

It has stayed above the RBI’s 4 per cent target for three straight months.