The Indian rupee fell to a fresh record low, trading at Rs 90.42 per US dollar on Thursday, as persistent demand for dollars from corporates and banks outweighed brief optimism triggered by the US Federal Reserve’s recent rate cut.
While the Fed announced a widely expected rate reduction amid a sharply divided vote and signaled a prolonged pause ahead, its less-hawkish stance offered limited relief to the rupee. Asian currencies traded mixed, and the dollar index recovered slightly from a near two-month low.
Dollar Demand Drives Rupee Weakness
Market analysts attributed the rupee’s slide to heavy dollar buying by foreign and domestic banks, mainly for merchant and corporate payments.
“There is consistent dollar outflow pressure which is outweighing the supportive global cues,” a banker told Reuters.
The rupee is now on track for its steepest annual decline since 2022, pressured by uneven foreign portfolio flows and recent US trade tariffs affecting Indian exports. Analysts warn that failure to secure favorable trade accommodations with Washington could expose the rupee to deeper losses in the coming months.
RBI Swap to Stabilize Market
Attention is turning to the Reserve Bank of India’s $5 billion dollar-rupee buy/sell swap, scheduled next week. This operation aims to inject liquidity into the banking system, which has been strained by earlier RBI interventions and heavy IPO-related inflows. Bankers expect strong participation, with the swap potentially helping absorb excess dollar liquidity and stabilize short-term volatility.
Finance Minister’s Perspective
Finance Minister Nirmala Sitharaman, speaking at the Hindustan Times Leadership Summit 2025, emphasized the importance of contextualizing currency movements within India’s economic fundamentals.
“The rupee will find its own level,” she said, urging caution against politicizing the currency’s weakness. “Currency exchange rates are extremely sensitive… this debate must be circumscribed by the realities of where the economy stands today.”
