Rupee at 90 Per Dollar: Why the Fall Happened and What It Means for India

Rupee at 90 Per Dollar Latest News

• India’s rupee fell below the crucial ₹90-per-dollar mark, unsettling financial markets and raising broader macroeconomic concerns. The currency has now weakened over 5% this year.
• Analysts say the rupee’s movement reflects both domestic and global pressures, including a strong US dollar and delays in the first tranche of the India–US trade agreement.

Rupee Breaches the 90-Per-Dollar Mark

• The rupee slipped below the psychologically crucial ₹90-per-dollar level, unsettling markets and intensifying concerns over India’s macroeconomic outlook. 
  • The ₹90 mark is a critical psychological threshold for the rupee. Once breached, it can trigger buy-stop orders and fuel sharper depreciation, pushing the currency toward ₹91 or beyond.
• The currency has fallen over 5% this year, and the breach reflects a cumulative build-up of pressures, not a single shock.

Strong Domestic Fundamentals Haven’t Stopped the Slide

• India’s macro indicators appear supportive:
  • Crude oil prices have eased
  • Inflation has dropped below 1%
  • GDP growth hit 8.2% in Q2
• Yet the rupee continues to face sustained downward pressure, revealing a disconnect between strong domestic fundamentals and the currency trend.

Foreign Outflows and Trade Deal Uncertainty Weigh on Sentiment

• Persistent foreign portfolio investor (FPI) outflows, driven by profit booking and shifts to other markets, have drained liquidity and raised demand for the US dollar.
• Meanwhile, delays in concluding the India–US trade deal have heightened uncertainty about future trade flows, tariff competitiveness, and the balance-of-payments outlook, dampening market confidence.
• Exports remain under pressure, while a surge in gold imports during the festive season has amplified dollar demand. 

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India’s Trade Deficit Shows Signs of Widening

• India’s external sector is under growing pressure as early indicators point to a widening trade deficit — a situation where imports exceed exports, increasing demand for dollars and weakening the rupee.
• India’s merchandise exports fell 11.8% year-on-year in October 2025, dropping to an 11-month low of $34.4 billion. The decline was driven by:
  • Lower shipments to the US, a major export market
  • Higher US tariffs
  • A high base from strong export growth in 2024
• In contrast, imports surged 16.6% year-on-year to a record $76.1 billion in October 2025. 

Why the Trade Gap Is Widening

• The widening deficit is being shaped by:
  • Softening demand from major export markets
  • Strong domestic demand for imported goods
  • Unfavourable tariff conditions, especially with the US
  • Weak export competitiveness across major sectors

Gold’s Role in Widening the Trade Deficit

• The biggest contributor was gold imports, which tripled to $14.7 billion amid festive-season demand.
• Surging gold prices and massive import volumes have become a key force shaping India’s trade dynamics.
• They have intensified pressure on the rupee, contributed to a widening trade deficit, and added stress to the overall balance of payments outlook.

Implications for the Rupee and Economy

• If these trends continue, India’s trade deficit is likely to worsen, putting additional pressure on the rupee, widening the balance-of-payments gap, and intensifying broader macroeconomic challenges.

Uncertainty Over India–US Trade Deal Adds Pressure on the Rupee

• Markets are increasingly worried as the long-awaited India–US trade agreement remains unresolved. 
• Without a deal, analysts say, the rupee may act as a “pressure valve,” gradually weakening to offset tariff disadvantages faced by Indian exporters.
• Until a clear announcement is made, markets are likely to price in the uncertainty—with the rupee reflecting it most visibly.

Foreign Investors Continue to Pull Out of Indian Markets

• India’s equity markets have underperformed for over a year, prompting foreign portfolio investors (FPIs) to steadily withdraw funds. 
• Since January 2025, FPIs have pulled out ₹1.48 lakh crore, exerting consistent downward pressure on the rupee.

Why FPIs Are Selling Despite Strong Macro Indicators

• Although India’s macroeconomic backdrop appears stable, stock market performance tells a different story.
• Over the past year, India has been one of the weakest performers among major global markets.
• Despite occasional record highs, returns have significantly lagged those in faster-growing international markets.
• As a result, investors have increasingly treated India as a liquidity source, redirecting capital to more profitable regions.

RBI Allowing the Rupee to Weaken

• There is growing debate over whether the RBI is intentionally letting the rupee depreciate.
• Many economists argue the central bank is not pushing the rupee down, but simply responding to global shifts and India’s current macroeconomic dynamics.
• They note that RBI has been selling dollars only to curb volatility, not to target a specific exchange rate.

Behavioural Factors Driving Sentiment

• According to experts:
  • Importers are buying dollars aggressively
  • Exporters are holding back, waiting for better rates
  • The dollar index is below 100, which should normally support the rupee
• They note that RBI’s relative silence, combined with IMF criticism of the rupee’s movement, is fueling negative sentiment.

RBI’s Soft-Touch Strategy

• RBI appears to be conserving firepower:
  • Its forward book is already substantially drawn down, including in offshore NDF markets
  • It is using a measured approach, intervening only to prevent disorderly volatility, not to defend a specific level
• This suggests a deliberate balancing act:
  • Allowing the rupee to find its market-determined level, while remaining poised to step in if the slide becomes excessively disruptive.

Source: IE | ToI