The Indian Rupee gained 2% in a single week, its largest rise in seven months, but the trade deficit expanded to $30.21 billion in September, and the central bank has already utilized about half of its intervention funds.

The Indian Rupee gained approximately 2% this week, closing at 84.96 per US dollar on Friday, marking its largest weekly increase in seven months. This follows measures by the Reserve Bank of India (RBI) to stabilize the exchange rate, including directing oil dollar demand to the over-the-counter market and significantly tightening limits on foreign currency purchases. However, these policies have also had side effects: hedging costs have surged to a decade high, bond yields have climbed to their highest level in over three years, and foreign exchange market liquidity has rapidly shrunk. Fundamental data shows India's merchandise trade deficit widened to $30.21 billion in September, up from $26.8 billion in August, intensifying market concerns about current account pressures. On the reserves front, the RBI raised over $14 billion through special measures and has used about half of it to replenish foreign exchange reserves. However, as of the end of August, the central bank's net forward dollar liabilities still stood at $20 billion.