The Indian rupee hit a fresh record low of 89.48 against the US dollar on Friday, surpassing its previous all-time low of 88.80. The currency dropped 0.8% amid fading hopes of Federal Reserve rate cuts and ongoing uncertainty over the India-US trade deal.
Market experts say global risk aversion, triggered by sharp declines in cryptocurrencies and AI technology stocks, has weighed heavily on emerging market currencies like the rupee. Anindya Banerjee, Head of Research at Kotak Securities, noted that jitters around the delayed trade agreement are also dampening investor sentiment.
Earlier, Reserve Bank of India Governor Sanjay Malhotra suggested that pressure on the rupee would ease once a positive trade deal with the US was signed. However, the rupee decisively breached the 89-level—once thought to be a floor defended by the RBI—leading to aggressive short covering.
Currency strategist Dhiraj Nim from Australia and New Zealand Bank said RBI appears cautious about intervening amid increasing dollar demand and unclear timelines for the trade deal. Meanwhile, foreign portfolio investors have sold Indian equities worth ₹143,698 crore this year, further pressuring the currency.
With the rupee now among Asia’s weakest performers, traders anticipate the pair could soon challenge the psychological mark of 90. Kotak Securities expects the rupee to trade between 88.70 and 90.30 in the near term. The rupee remains undervalued on a real effective exchange rate basis, but a successful India-US trade pact could provide needed relief.
The market will be closely watching developments on the trade front and global risk appetite for signs of stability or further depreciation in the rupee.