Amid ongoing foreign investment outflows and anxiety over India-US trade negotiations, the rupee fell to a new record low on Tuesday, breaking the 91-per-dollar level for the first time during intraday trading. It then somewhat recovered to end 15 paise worse against the US dollar at 90.93. Before reducing losses later in the session, the native currency first fell as much as 36 paise to reach an all-time low of 91.14 against the US dollar. According to currency traders, the loss occurred in spite of the US dollar’s weakening and significant drops in the price of crude oil globally.
The rupee began trading against the dollar at 90.87 on the interbank foreign currency market. Throughout the day, it fluctuated between 90.76 and 91.14 before closing at 90.93.
On Monday, the currency finished at 90.78. The rupee’s value versus the dollar has fluctuated between 90 and 91 over the last ten trading sessions. In just five sessions, the currency has lost 1% of its value in relation to the US dollar.
A growing trade deficit, changing expectations related to India’s trade agreement with the US, and comparatively poor support from the capital account have all contributed to the rupee’s depreciation in the current fiscal year, according to Minister of State for Finance Pankaj Chaudhary.
During the current financial year, the depreciation of the Indian rupee has been driven by a widening trade deficit and uncertainty surrounding developments in India’s trade agreement with the United States, coupled with relatively weak support from the capital account, Chaudhary said in a statement quoted by PTI.
He noted that while a weaker currency can boost export competitiveness and support economic growth, it also has the potential to increase the cost of imports. “Currency depreciation is likely to improve export competitiveness, which can have a positive impact on the economy. However, it may also lead to higher prices for imported goods,” Chaudhary said. He added that the overall effect on domestic inflation depends on how much international commodity price movements are passed on to the local market.
Citing data from the past decade, Chaudhary pointed out that the rupee has declined by 5.1 per cent so far this year, up to December 3.
Meanwhile, currency traders indicated that the rupee could weaken further and potentially cross the 92-per-dollar level later this month.
In interbank foreign exchange trading, the rupee opened at 90.87 against the US dollar and moved within a range of 90.76 to 91.14 during the session. It eventually settled at 91.01 (provisional), marking a decline of 23 paise from the previous close.
The Indian rupee closed at 90.78 against the US dollar on Monday, marking a decline of 29 paise from its previous close.
Commenting on the currency’s movement, Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said the rupee touched a fresh lifetime low as persistent dollar buying continued. He attributed the pressure to reports that US President Donald Trump has not agreed to India’s latest trade proposals, pushing the trade deal into uncertainty until fresh negotiations are concluded, according to a PTI report.
Bhansali added that foreign portfolio investors (FPIs) are likely to remain net sellers, while currency speculators may continue to push the USD/INR pair higher in the absence of intervention by the Reserve Bank of India (RBI). “The 92 level now looks imminent unless the RBI steps in or a trade agreement is finalised,” he said, projecting a near-term trading range of 90.75 to 91.25.
Meanwhile, exchange data showed that foreign institutional investors offloaded equities worth Rs 1,468.32 crore on Monday, adding further pressure on the domestic currency.
FAQs on Rupee Falling to Record Low Against US Dollar
Why did the Indian rupee hit a new record low?
The rupee weakened due to continued foreign investment outflows, concerns over India–US trade negotiations, a widening trade deficit, and weak support from the capital account. These factors put sustained pressure on the domestic currency.
What was the lowest level the rupee touched during intraday trade?
On Tuesday, the rupee breached the 91-per-dollar mark for the first time, hitting an all-time intraday low of 91.14 against the US dollar.
Where did the rupee finally close against the US dollar?
After recovering slightly from the day’s lows, the rupee ended the session 15 paise weaker at 90.93 against the US dollar.
How did the rupee perform at the start of the trading session?
The rupee opened at 90.87 in the interbank foreign exchange market and traded within a range of 90.76 to 91.14 during the session.
How has the rupee performed in recent trading sessions?
Over the last 10 trading sessions, the rupee has fluctuated between 90 and 91 against the dollar. It has lost about 1% in just five sessions, reflecting heightened volatility.
What role are foreign investors playing in the rupee’s decline?
Foreign portfolio investors (FPIs) have continued to sell Indian equities. On Monday alone, foreign institutional investors divested shares worth Rs 1,468.32 crore, adding pressure on the rupee.
Why is the India–US trade deal impacting the rupee?
Market sentiment weakened after reports suggested that US President Donald Trump has not accepted India’s latest trade proposals, pushing negotiations into uncertainty and increasing demand for the US dollar.
What do currency experts say about future levels of the rupee?
According to market experts, the 92-per-dollar level could be breached if the Reserve Bank of India (RBI) does not intervene or if progress on the trade deal remains stalled. Near-term trading is expected between 90.75 and 91.25.
What has the government said about the rupee’s depreciation?
Minister of State for Finance Pankaj Chaudhary said the rupee’s fall is mainly due to a rising trade deficit, uncertainty around India–US trade talks, and weak capital inflows.
Can a weaker rupee benefit the economy?
Yes, a weaker rupee can boost export competitiveness, supporting economic growth. However, it may also increase the cost of imports, especially commodities.
Will the rupee’s fall increase inflation in India?
The impact on inflation depends on how much global commodity price changes are passed on to domestic prices. A higher pass-through could raise inflationary pressures.
How much has the rupee depreciated so far this financial year?
According to government data, the rupee has declined by 5.1% so far this year, up to December 3.
Why did the rupee fall despite a weaker US dollar and lower crude oil prices?
Currency traders said domestic factors such as capital outflows, trade uncertainty, and speculative dollar buying outweighed the positive impact of softer crude prices and a weaker US dollar.
Why is RBI intervention important when the rupee weakens sharply?
RBI intervention helps control excessive volatility in the currency market. While the central bank may allow gradual depreciation, sharp and speculative moves can disrupt trade, inflation expectations, and investor confidence.
Has the RBI intervened in the forex market recently?
Market participants say there has been limited visible intervention so far, which has allowed speculators to push the USD/INR pair higher.
How does a weaker rupee affect Indian importers?
A depreciating rupee raises the cost of imports, particularly crude oil, electronics, fertilisers, and machinery, increasing input costs for businesses.
Which sectors benefit from a weaker rupee?
Export-oriented sectors such as IT services, pharmaceuticals, textiles, auto components, and chemicals typically benefit, as their overseas earnings increase in rupee terms.
What impact does the rupee’s fall have on crude oil imports?
Even when global crude prices decline, a weaker rupee can offset those gains, keeping India’s oil import bill elevated.
Is the rupee the weakest among emerging market currencies?
While the rupee has underperformed recently, several emerging market currencies are also facing pressure due to global uncertainty, US interest rate expectations, and capital outflows.
How do US interest rates influence the rupee?
Higher US interest rates make dollar assets more attractive, encouraging capital outflows from emerging markets, which weakens currencies like the rupee.
What role does speculation play in the rupee’s movement?
Speculators tend to increase dollar positions during periods of uncertainty, accelerating currency declines in the absence of strong policy signals.
Could the rupee cross 92 per dollar soon?
Currency traders believe the rupee could breach the 92 level if trade uncertainty persists and RBI intervention remains limited.
Is this depreciation similar to past currency shocks?
Unlike sudden shocks seen during global crises, the current depreciation appears gradual and sentiment-driven, though volatility has increased.
How does currency depreciation affect stock markets?
A falling rupee can trigger foreign investor selling, pressure equity indices, and increase volatility, particularly in rate-sensitive sectors.
What should retail investors watch amid rupee volatility?
Investors should track RBI signals, FPI flows, global crude prices, US bond yields, and trade negotiations, as these factors influence currency direction.
Can currency depreciation impact India’s fiscal deficit?
Yes, higher import costs and interest payments on foreign debt can add pressure to government finances.
Is a weaker rupee always bad for the economy?
Not necessarily. Moderate depreciation can support exports and growth, but sharp or disorderly declines can hurt inflation and financial stability.
What are traders expecting in the near term?
Traders expect continued volatility with the USD/INR likely to remain between 90.75 and 91.25, unless a major policy or trade development occurs.
