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Informist, Friday, Nov. 21, 2025

 

By Pratiksha

 

NEW DELHI – The rupee slumped below the psychologically-crucial 89 per dollar mark Friday as the Reserve Bank of India let go of its strong hold, after defending the 88.80 level for nearly two months. However, traders do not see the Indian currency weakening further, as they expect the central bank to maintain its support until the proposed bilateral trade deal between India and the US is in place.

 

The rupee posted its biggest single-day fall in over six months to a record low of 89.4950 a dollar on Friday. "90 is a big psychological level. I don't think RBI is going to let it breach so easily because that will give an indication that they are not bothered about rupee depreciation," said Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services. "Trade deal still remains the main trigger for the market."

 

In August, the US imposed steep 50% tariffs on Indian goods, half of which was a penalty for purchasing crude oil from Russia. Since then, both countries have been negotiating for a mutually beneficial trade deal, with India particularly looking at lower US tariffs on Indian goods. US President Donald Trump last week said the US was coming closer to making a "fair trade deal" with India, adding that the tariffs would come down at "some point." However, uncertainty around the trade deal has dampened investors' risk appetite.

 

Additionally, market participants are taking comfort from the RBI's intervention strategy adopted since the US tariffs were imposed on India. The central bank has tightened its grip on the Indian currency ever since the imposition of US tariffs, aggressively intervening in both the offshore non-deliverable forwards and the spot market.

 

The central bank not only kept the rupee away from the 88.80 mark since September but also, at times, went out of its way to push the Indian unit sharply higher against the dollar. Case in point: On Oct. 15, the Indian unit posted an intraday gain of 89 paise, the most since November 2022, all thanks to the RBI.

 

"I don't think RBI will let all of its efforts go to waste just due to one day's sharp move," a senior treasury official at a state-owned bank said. "It is a pattern now that RBI allows heavy moves and then lets it consolidate. That is what should happen from here on."

 

The rupee has depreciated 2.1% against the dollar since Washington added the punitive 25% tariffs on India on Aug. 27. Of this, 0.9% of the depreciation happened on Friday.

 

"Overall, we guide for a moderate weakness in the currency in the remaining part of FY26, as the heavy adjustment has now taken place," YES Bank said in a note. "For now, we have the comfort of India's inflation being lower than the US inflation, implying that a heavy depreciation is not warranted." The private-sector bank expects the rupee to remain capped at 90 a dollar by FY26-end.

 

Market participants also pointed out that the next big figure for the rupee will be 90 per dollar, and the central bank may not be comfortable with it breaching that level at a time when there is a likelihood of a trade deal between India and the US. For instance, the central bank likely sold dollars around 89.49 a dollar on Friday, to prevent the domestic unit from testing the 90 a dollar level.

 

RBI Governor Sanjay Malhotra Thursday said that a trade deal between India and the US should help reduce pressure on the rupee, adding that he is confident of a good trade deal with the US going forward. "Exports did come down in the month of October and capital flows have been muted, but we are quite confident that there will be a good trade deal (with the US), hopefully, going forward," he said. "And that should relieve whatever pressure has been there on our current account."

 

However, market participants also highlighted that one of the major reasons for the rupee to depreciate Friday was a strengthening dollar owing to fading expectations of a rate cut by the US Federal Reserve next month. The outlook for the Indian currency also depends on how the greenback performs going ahead, they said.

 

"Everybody was short on INR for too long. It made no sense for the RBI to burn its reserve at this pace at a time when the dollar has firmed up," Dhiraj Nim, FX strategist at ANZ Bank India, said. "However, I feel that the rupee will rise once the trade deal happens. I still see 88.00 as the base case for rupee by December."  End

 

Edited by Ashish Shirke

 

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