Rupee Plunges to Record Low, Nears ₹90 Mark
The Indian rupee hit a historic low on Tuesday, breaching the Rs 89.59 per dollar mark and sliding to Rs 89.80 intraday. A perfect storm of a widening trade deficit, sustained foreign fund outflows, and delayed India-US trade talks drove the sharp decline.
Key Takeaways
- Rupee touched a record low of Rs 89.59/$ and Rs 89.80 intraday.
- RBI’s non-intervention policy accelerated the fall, triggering stop-loss orders.
- Trade deficit, FPI outflows, and strong global dollar added pressure.
- Markets now eye the Rs 90 psychological level and potential RBI rate cut.
RBI’s Sideline Stance Fuels Decline
In a departure from past practice, the Reserve Bank of India did not intervene to sell dollars in the open market. This absence of support triggered a cascade of stop-loss orders placed by traders around Rs 89.50, accelerating the rupee’s slide. Barclays analysts noted the currency could cross Rs 90, though the pace of the fall was unexpected.
Trade Deficit and FPI Outflows Create Double Whammy
Weak trade data combined with continuous selling by Foreign Portfolio Investors (FPI) placed the rupee under severe strain. Importers scrambled to hedge positions, spiking dollar demand. Globally, a strong US dollar index and a risk-off sentiment in emerging markets added to the downward pressure.
Uncertainty Over India-US Trade Deal
Hopes for progress on the India-US trade pact this month faded as no concrete signals emerged, increasing the rupee’s vulnerability. Barclays’ Mitul Kotecha suggested a finalised deal could offer the currency some temporary relief.
What’s Next for the Rupee?
All eyes are now on the RBI’s Monetary Policy Committee meeting this Friday, where a rate cut is speculated. While lower rates could further pressure the rupee, concerns over slowing credit growth may limit aggressive action. The Rs 90 level is the next critical psychological barrier. The central bank retains the capacity to intervene, but its current strategy appears to let the rupee find its natural level.
