The Indian rupee hit a fresh all-time low on Thursday, depreciating by 28 paise to trade at ₹90.43 against the US dollar in early market hours. The fall came amid significant foreign institutional investor (FII) outflows, elevated demand for dollars from importers, and limited intervention by the Reserve Bank of India (RBI), according to forex market participants.
The currency opened at ₹90.36 per dollar in the interbank foreign exchange market but continued to weaken further to the record low in the initial trades, slipping from its previous close by 28 paise. This marks another major milestone in the rupee’s downward trend after it breached the ₹90-a-dollar mark for the first time on Wednesday, eventually settling at a then-record low of ₹90.15 against the greenback.
Market Anticipation of Crucial MPC Outcome Weighs on Sentiment
Traders attribute the persistent downward pressure to cautious behaviour among global investors ahead of the upcoming Monetary Policy Committee (MPC) decision. With uncertainty in interest rate direction and inflation trends, RBI’s restrained intervention is adding to volatility, pushing the rupee deeper into weakness.
“Demand for dollars from import-dependent industries and foreign fund withdrawals have created stress on the domestic currency,” a forex trader said.
Government Maintains Calm “No Impact on Inflation or Exports”
Despite the sharp depreciation, Chief Economic Adviser V. Anantha Nageswaran reassured that the weakening rupee has not yet shown any adverse impact on inflation levels or export competitiveness. Speaking at an event on Wednesday, he highlighted that India’s macroeconomic fundamentals remain stable.
However, he acknowledged the two-sided effect of a falling rupee:
- Supports outward shipment and export competitiveness
- Makes imports costlier, raising input costs for several industries
Import-heavy sectors like petroleum, consumer electronics, gems and jewellery are likely to face higher inflationary burden due to expensive inbound supplies.
“This may raise inflationary expectations if cost pressures persist,” the CEA stated.
Global Factors Add Fuel: Strong Dollar & Costlier Oil
Meanwhile, global cues continue to favour the US dollar:
- The Dollar Index tracking the greenback against six major currencies rose 0.14% to 98.99, signalling strength in the American currency.
- Brent crude prices increased 0.49% to $62.98 per barrel in futures trading, intensifying fears of further inflation in energy imports.
- A stronger dollar typically leads to sharper depreciation in emerging market currencies like the Indian rupee.
Trade Tensions and Investor Caution Continue
Analysts suggest global investors are treading carefully amid ongoing US trade conflicts, adopting a wait-and-watch stance to gauge geopolitical developments. Expectations remain that negotiations may see clarity toward the year-end, potentially stabilizing market dynamics.
With markets bracing for central bank cues and global uncertainties ahead, the rupee may continue to face pressure unless:
- FII flows turn favourable
- Crude prices soften
- RBI steps in more actively
- Geopolitical tensions ease
Outlook: All Eyes on RBI and Market Intervention Strategy
The record low exchange rate highlights the tug-of-war between inflation control and currency stability. If the rupee continues its slide, economists expect the RBI to enhance its intervention through forex reserves or policy communication to calm the markets.
For now, the rupee’s fall reflects a combination of global economic forces and cautious domestic strategy and investors are closely watching what comes next.
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