Indian Rupee Approaches 90 Against US Dollar Amid Market Pressures

The Indian rupee is facing significant downward pressure this week, approaching the psychological threshold of 90 against the US dollar. Following a record low of 89.49, the rupee has depreciated by 0.8 per cent over the past week, influenced by factors including capital outflows, uncertainty surrounding a potential India-US trade agreement, and a perceived lack of intervention from the Reserve Bank of India (RBI). A trader quoted by Reuters noted that the unexpected depreciation has left the market unsettled, suggesting that this trend may continue.

Since the beginning of 2025, the rupee has fallen by 4.5 per cent, underperforming compared to other regional currencies, despite strong domestic economic indicators and a robust stock market. Analysts have pointed to US tariffs as a significant barrier impacting India’s trade and foreign investment flows, with hopes that a trade deal could help stabilise the currency.

Abhishek Goenka, founder of IFA Global, commented on the rupee’s outlook, stating that it may stabilise within a range of 88.80 to 90.00, potentially moving in a gradual manner. Meanwhile, the dollar index strengthened last week, even as markets considered the possibility of a rate cut by the US Federal Reserve, following comments from New York Fed President John Williams.

Bond markets are anticipated to reflect trends in liquidity and forthcoming economic indicators. The 10-year benchmark bond (6.33% 2035) ended at 6.5665 per cent last Friday, with predictions for this week suggesting a band of 6.52 to 6.60 per cent. The RBI has recently engaged in consecutive bond purchases, totalling Rs 148.10 billion in the week ending November 14, the largest in nearly six months. This activity has sparked speculation that the purchases may be more about meeting replacement demand than indicating a shift in yield strategy.

Market participants are also closely monitoring the RBI’s monetary policy decision scheduled for December 5, with speculation regarding a possible rate cut. Deutsche Bank’s India economist, Kaushik Das, has predicted a 25-basis-point reduction, citing calculations that suggest a terminal repo rate of 5.25 per cent. The bank projects GDP growth for the July-September quarter at 7.7 per cent, slightly lower than the previous quarter’s 7.8 per cent.

On Monday, the rupee rebounded slightly, trading at 89.20, as banks and importers sold dollars in response to declining global crude prices. Reports from PTI indicate that the RBI intervened in the offshore non-deliverable forward market, helping to maintain the currency within the 89 to 89.30 range.

Last Friday, the rupee had experienced its largest single-day decline in over three years, dropping by 98 paise to close at 89.66, amid heightened demand for dollars and weak performance in equity markets. This week, key economic data is scheduled for release, including India’s fiscal deficit, industrial output, and GDP figures on November 28, alongside various US economic indicators such as producer price index, retail sales, consumer confidence, and durable goods orders. The outcomes of these reports are expected to further influence market sentiment and currency stability.