The Indian rupee breached the psychological level of 90/$ for the first time on Wednesday as the delayed trade deal between India and US continued to dampen market sentiments. In addition, limited intervention by the Reserve Bank of India (RBI) and persistent foreign outflows have kept the currency under pressure.
The domestic currency finally closed 30 paise down at 90.19 after hitting at 90.29 during intra-day. The rupee pared some losses after likely intervention from the Reserve Bank of India, said forex traders. In fact, the rupee has taken just eight sessions to depreciate from 89 to 90.
Wednesday’s fall to a fresh record lows happened for the fourth consecutive session. This has taken the year-to-depreciation (YTD) of the currency to 5.53%, the worst in three years. In the calendar year 2025, it depreciated 5.35%.
What did CEA say?
However, the government does not seem to be too worried. Chief economic advisor V Anantha Nageswaran at the CII IndiaEdge Summit said that he is not “losing sleep” over the weakening of the domestic currency as long as it is not hurting exports. “It will come back next year. Right now, it’s not hurting our exports or inflation. I am not losing my sleep over it. If it has to depreciate now probably is the right time,” he added.
What do analysts and traders say?
Even the RBI’s activity has been limited in recent days. “The core issue stems from a fundamental demand-supply imbalance in the forex market, driven by structural capital outflows. However, the RBI’s activity in the last few sessions has been limited, with little to no dollar supply on certain days, allowing the spot to drift lower,” said V R C Reddy, head of treasury, Karur Vysya Bank.
Though not aggressively, the RBI was there in multiple levels by selling dollars, said the forex traders. They were active at 90.15 and 90.30 levels, traders added.
The rupee continues to be the worst-performing currency in FY26 among its Asian peers and remains in an oversold zone despite dollar weakness, while most other Asian currencies appreciated.
“On average, the rupee depreciates about 3% annually, but this year it has weakened by 5% due to weak sentiment. The trajectory from 90 to 95 will happen very fast. I think they (RBI) will have to intervene to prevent further sharp depreciation. They will have to spend some $ 10 billion dollars to support the rupee,” Madhavankutty G, chief economist at Canara Bank. He added that he expects 3% more depreciation in FY26 and it can go even higher if the RBI does not intervene.
As India is still not able to secure a trade deal with the US, some traders feel there is little reason to strongly defend the currency. “I believe the RBI intervention is limited at a time when the current account is widening along with persistent foreign outflows. However, they are active in the market to manage volatility, but in a mild way. Without the RBI’s involvement, the rupee might have already reached 92,” said Ritesh Bhansali, deputy CEO at Mecklai Financial Services.
For the second consecutive month, the RBI’s dollar short forward positions rose $ 4.2 billion to $ 63.6 billion, as per the regulator’s data. This clearly indicates the increased FX interventions by the central bank to defend the rupee. With the rupee continuing to depreciate sharply, importers have rushed to hedge their exposures, pushing the forward premium. One-year premiums have risen since November-end from 2.21% to 2.49%.
“The impact has therefore come through both sides, spot weakness and rising forward premiums, creating a double whammy for importers. With no fresh supply visible on the back of global uncertainties, panic hedging has intensified, leading to further upside pressure on forward premia and keeping the rupee under stress in the near term,” said Reddy.
Market participants will now keenly await for the comments from Governor Sanjay Malhotra on currency during the RBI’s upcoming monetary policy meeting scheduled on December 5.