Rupee Hits Record Low Against Dollar, Impact on Indian Investors Explained
Record low rupee fueled by weak capital flows, strong importer demand, and trade uncertainties; experts warn of further depreciation toward 91 without RBI intervention.
India, Dec 03 : The Indian rupee breached the 90-per dollar mark on Wednesday for the first time in history, touching 90.13 per USD, amid persistent capital outflows, robust importer demand, and uncertainty over a potential US-India trade deal. This follows a fifth consecutive day of depreciation despite regular intervention by the Reserve Bank of India (RBI).
A currency trader noted that the slip past 88.80, a level previously defended by the RBI, has removed a key psychological anchor, leaving the rupee more vulnerable to underlying pressures, including speculative positions and soft capital flows.
Anindya Banerjee, Head of Commodity and Currency at Kotak Securities, explained that the move above 90 was driven by short-covering by speculators and sustained importer demand. “The 90 level is a major psychological barrier, reinforced by buy-stop orders. If USD/INR sustains above this zone, the market could trend toward 91 or higher,” he said.
Banerjee highlighted factors weighing on the rupee, including foreign portfolio investor (FPI) outflows, the early unwinding of the yen carry trade, and lingering trade deal uncertainty with the US. A decisive daily close above 90 could encourage momentum traders, further accelerating depreciation.
Dollar Movement and Market Outlook
The U.S. dollar index eased slightly to 99.22 in Asian trade as markets speculated about Kevin Hassett as the potential next Fed chair.
Emkay Global expects the rupee to trade between 88 and 91 for FY26, citing its 4.7% year-to-date decline, underperformance versus Asian peers, and impacts of US tariffs. The brokerage noted that the rupee’s trajectory will depend on the resolution of US-India trade negotiations, broader Asian trade strategies, and portfolio flows.
Impact on Indian Markets
The rupee’s slide has also impacted Indian equities. Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the Nifty’s 300-point correction from its record high reflects technical adjustments rather than fundamentals.
He warned that continued rupee depreciation, coupled with minimal RBI intervention, is driving foreign investor sell offs despite strong corporate earnings and GDP growth. Analysts note that the currency could stabilize or rebound once a US-India trade deal materializes, but the direction will remain sensitive to tariff policies and global flows.
With the rupee now trading above 90, experts caution that speculative momentum could push it toward 91 unless decisive measures are taken, influencing import costs, inflation, and foreign portfolio investment flows in the coming months.
