Rupee Update: Currency Approaches 90 as RBI Exercises Caution
The Indian rupee is facing significant pressure as it approaches the critical threshold of 90 per US dollar, following a record low of 89.49 last Friday. The currency has depreciated by 0.8% over the past week, influenced by portfolio outflows, uncertainty regarding a potential US-India trade deal, and a perceived reduction in intervention from the Reserve Bank of India (RBI). Analysts are closely monitoring the situation, as the rupee’s decline raises concerns about its stability in the coming days.
Current Market Conditions
The Indian rupee’s recent performance has raised alarms among traders, particularly after it hit a record low of 89.49 against the US dollar. Over the past week, the rupee has experienced a 0.8% decline, primarily driven by significant portfolio outflows and skepticism surrounding a potential trade agreement between the US and India. This uncertainty has led to a perceived retreat by the RBI from its role in defending the currency at key support levels. According to a trader from a major private bank, the unexpected drop in the rupee has left the market unprepared, suggesting that the downward pressure may continue. Despite strong domestic economic fundamentals and a robust equity market, the rupee has weakened by 4.5% in 2025, lagging behind its regional counterparts.
Factors Influencing the Rupee
Analysts have identified US tariffs as a significant factor impacting India’s trade and portfolio flows, with hopes that a trade agreement could help stabilize the rupee. Abhishek Goenka from IFA Global indicated that the currency might stabilize within the range of 88.80 to 90.00, moving in a gradual manner. Meanwhile, the dollar index has strengthened, even as markets speculate about a potential rate cut by the US Federal Reserve following dovish remarks from New York Fed President John Williams. The bond market is also expected to reflect liquidity trends and upcoming growth indicators, with the 10-year benchmark bond closing at 6.5665% last Friday. Traders anticipate a band of 6.52% to 6.60% for this week.
RBI’s Recent Actions
In response to the currency’s decline, the RBI has engaged in consecutive bond purchases, acquiring Rs 148.10 billion in the week leading up to November 14, following a purchase of Rs 124.70 billion the previous week. These actions mark the RBI’s first bond purchases in nearly six months. However, the nature of these operations has led to speculation that they are primarily for replacement demand rather than a shift in yield stance. The market is also awaiting the RBI’s policy decision on December 5, with uncertainty surrounding the possibility of a rate cut. Deutsche Bank’s India economist, Kaushik Das, has projected a 25-basis-point reduction, suggesting that a Taylor Rule calculation points to a terminal repo rate of 5.25%.
Future Outlook and Key Data Releases
The rupee showed signs of recovery on Monday, settling at 89.20 after banks and importers sold dollars, coinciding with a dip in global crude prices. The RBI’s intervention in the offshore NDF market also contributed to keeping the currency within the 89–89.30 range. However, the rupee had previously experienced its steepest one-day fall in over three years, closing at 89.66 amid strong dollar demand and weak equity performance. Key economic data set to be released this week includes India’s fiscal deficit, industrial output, and GDP figures on November 28, alongside various US indicators such as PPI, retail sales, consumer confidence, and durable goods orders. These releases will be crucial in shaping market expectations and the rupee’s trajectory in the near term.
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