Currency Update: Rupee Falls 61 Paise to Record Low of 88.19 Against Dollar as FIIs Intensify Pressure
The Indian rupee has hit a historic low, closing at 88.19 against the US dollar on Friday, marking a significant decline of 61 paise. This drop comes amid rising trade tensions with the United States, increased demand for dollars at the month’s end, and ongoing withdrawals by foreign investors. The currency’s decline is compounded by the impact of new tariffs imposed by the US on Indian exports, which has raised concerns about India’s trade deficit and economic stability.
Rupee’s Unprecedented Fall
On Friday, the rupee opened at 87.73 in the interbank forex market but quickly fell to a low of 88.33 before settling at 88.19. This closing marks the first time the rupee has breached the 88-per-dollar mark. Previously, the rupee had approached this level, reaching 87.95 intra-day on February 10, 2025, and closing at 87.88 on August 5, 2025. The recent decline reflects a broader trend of currency stress, driven by external factors such as US tariffs and internal pressures from weak domestic equity markets.
Market analysts are predicting continued pressure on the rupee due to the recent trade tariffs imposed by the US, which are expected to exacerbate India’s trade deficit. Anuj Chaudhary, a currency and commodities research analyst at Mirae Asset ShareKhan, indicated that the rupee is likely to maintain a negative bias in the coming days. He noted that the selling pressure from foreign institutional investors (FIIs) and the overall weakness in domestic markets could further impact the rupee’s performance.
Impact of US Tariffs
The US has recently implemented a 50 percent duty on various Indian goods, which is anticipated to significantly affect labor-intensive sectors such as textiles, leather, footwear, and shrimp. In response to these developments, Commerce and Industry Minister Piyush Goyal announced that the government would soon unveil measures aimed at enhancing India’s global trade presence and bolstering exports. He reassured exporters that the government would provide full support to navigate the uncertainties arising from the new tariffs.
The Reserve Bank of India (RBI) has also expressed concerns regarding the implications of US trade policies on India’s economic outlook. In its latest bulletin, the RBI highlighted that these uncertainties pose risks to demand in India, although it noted that inflation projections for the near term appear more favorable than previously expected.
Market Reactions and Future Outlook
In the wake of the rupee’s decline, the dollar index, which measures the US dollar against a basket of six major currencies, rose by 0.14 percent to 97.94. Analysts suggest that the dollar may continue to weaken due to rising expectations of interest rate cuts in the US. Traders are advised to monitor upcoming economic data, including the preliminary core PCE price index and personal spending figures from the US, which could influence currency movements.
Back in India, equity markets also faced challenges, with the Sensex dropping 270.92 points to close at 79,809.65 and the Nifty falling 74.05 points to 24,426.85. The selling pressure from FIIs has intensified, with reports indicating that they sold equities worth Rs 3,856.51 crore on Thursday, contributing to the rupee’s woes.
Global Commodity Trends
In global commodity markets, Brent crude oil prices fell by 0.76 percent, settling at $68.10 per barrel in futures trading. The decline in oil prices may have mixed implications for the Indian economy, as lower crude prices could ease inflationary pressures but also reflect broader concerns about global demand. As the situation evolves, stakeholders in the Indian economy will be closely watching both domestic and international developments that could impact currency stability and trade dynamics.
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