Rupee Plummets to Record Low Amidst India-US Trade Deal Uncertainty
The Indian rupee has breached a significant threshold, tumbling to an all-time low of ₹90.13 against the US dollar on Wednesday. This unprecedented decline marks a concerning development for the Indian economy and has triggered reactions from market analysts and the Reserve Bank of India (RBI).
The rupee's descent reflects a confluence of factors, primarily fueled by persistent uncertainty surrounding the much-anticipated India-US trade deal. Negotiations for the first tranche of the Bilateral Trade Agreement (BTA) have faced delays, casting doubts on the timeline for its completion. Although India's Commerce Secretary Rajesh Agarwal stated on November 28, 2025, that the first tranche of the BTA was expected to be signed by the end of 2025, the continuing delays have created anxiety.
Besides the trade deal uncertainty, other factors contributing to the rupee's weakness include consistent short-covering from speculators, sustained importer demand for the American currency, and lack of significant capital inflows. Foreign fund outflows from equities have further compounded the pressure on the rupee, making investor sentiment fragile. A Bank of Baroda report highlighted that the rupee's depreciation in November was particularly notable given the weakening of the US dollar during the same period.
The psychological impact of the rupee crossing the 90-per-dollar mark cannot be understated. Anindya Banerjee, Head of Commodity and Currency at Kotak Securities, noted that this level represents a major barrier, potentially triggering further volatility. He emphasized the importance of the RBI actively intervening to prevent speculators from establishing a one-way trend, which could lead to an unnecessary spike in USD/INR volatility.
The RBI has been intervening in the market to manage the rupee's fall, but the effectiveness of these interventions appears to be limited in the face of strong global headwinds. The central bank's actions indicate its concern over the potential inflationary impact of a rapidly depreciating currency. A weaker rupee makes imports more expensive, which could lead to higher prices for consumers and businesses.
Despite the current challenges, some experts remain optimistic about the rupee's future. Dharmakirti Joshi, Chief Economist at CRISIL Limited, believes that the rupee could appreciate if a trade deal with the US materializes. He also emphasized that fluctuations are inherent in the currency market and that the rupee has experienced periods of both rapid weakening and strengthening in the past.
The current situation presents a mixed bag of challenges and opportunities. While the weak rupee poses risks to inflation and import costs, it could also benefit exporters by making their products more competitive in the global market. The government and the RBI will need to carefully navigate these complexities to ensure macroeconomic stability and sustainable growth. Moving forward, the resolution of the India-US trade deal and the trajectory of global financial conditions will be critical determinants of the rupee's performance in the coming months.
