Rupee Plunges to Record Low of 89.66 Against US Dollar
The Indian rupee experienced its steepest single-day fall in over three years, plummeting 98 paise to hit an all-time low of 89.66 against the US dollar on Friday. The dramatic decline was driven by massive dollar demand in domestic forex markets amid global risk aversion and trade uncertainties.
Key Market Drivers
- Massive domestic dollar demand overwhelmed supply
- Foreign institutional investors sold ₹1,766.05 crore in equities
- Global risk-off sentiment affecting emerging market currencies
- Uncertainty around India-US trade deal negotiations
The rupee opened nearly flat at 88.67 before turning extremely volatile during afternoon trading, swinging between 88.59 and 89.66 during the session. This represents the currency’s worst performance since February 24, 2022, when it fell 99 paise in a single day.
“The Indian rupee witnessed a dramatic move on Friday, breaking its all-time high…in a sudden spike that caught the market completely off guard. Unlike earlier sessions, where news flow guided the price action, this move was largely demand-driven, triggered by an unexpected wave of dollar buying at a time when supply stayed quiet,” CR Forex Advisors said in a note.
“What made the move even more striking was that all other major indicators remained broadly stable—the dollar index, crude oil prices, EM currencies, and even gold hardly moved. This calm backdrop further reinforced that Friday’s jump in USD/INR was not driven by global cues, but purely by domestic dollar demand overwhelming available supply.”
Broader Market Impact
The domestic equity markets mirrored the currency’s weakness, with the Sensex declining 400.76 points (0.47%) to 85,231.92 and the Nifty falling 124 points (0.47%) to 26,068.15. Meanwhile, the dollar index edged up 0.09% to 100.17, while Brent crude futures dropped 2.18% to $62.00 per barrel.
“The global risk-off sentiment has spilt into currency markets after a sharp overnight sell-off in cryptocurrencies and AI-linked technology stocks,” said Anindya Banerjee, Head of Research Currency, Commodity and Interest Rate Derivatives at Kotak Securities.
“The sudden unwinding of risk trades is weighing on emerging-market currencies, including the Indian rupee. Adding to the pressure is the lingering uncertainty around the proposed India-US trade deal, which markets had hoped would offer clarity on the bilateral economic outlook. With no firm timelines emerging, sentiment remains fragile.”
RBI’s Stance on Currency Movement
Reserve Bank Governor Sanjay Malhotra clarified that the central bank does not target any specific level for the rupee, attributing the depreciation primarily to market-driven dollar demand and trade uncertainties following recent US tariff impositions.
“We do not target any level. Why is the rupee depreciating? (It) is because of the demand. It is for the markets to decide… It is a financial instrument, and there is a demand for dollars, and if the demand for dollars goes up, the rupee depreciates; and if the demand for the rupee goes up, the dollar comes down, then it appreciates,” Malhotra stated at an event in New Delhi.
The governor expressed confidence that India would secure a favorable trade deal with the US, which would help alleviate pressure on the current account.
