The Indian Rupee continues to be under selling pressure. The currency has hit a fresh low in opening trade on December 4. It opened at another record low of 90.41 against the US dollar.
Commenting on Rupee’s depreciation, Nilesh Shah, MD and CEO of Kotak Mahindra AMC told Financial Express.com that, “People look at the rupee in absolute terms. One has to look at rupee in relative terms and it is important to assess whether the rupee is near to its real effective exchange rate or not. India’s inflation is higher than its trade partners and productivity is lower than the trade partners. India’s trade deficit is the second largest in the whole world after United States. In that scenario, how can rupee appreciate? Unless and until our trade deficit becomes surplus and our productivity is better than our peer group. The rupee, at the moment, is going just towards where it should be in real effective exchange rate. This will help maintain India’s export competitiveness.
The rupee’s move has been fuelled by three key factors
3 reasons why the rupee falling?
The fall in the Indian currency has largely been attributed to a lack of substantial progress between the India-US trade deal and outflow of foreign equities from the market –
#1 US-India trade deal uncertainty: The growing uncertainty around the Indo–US trade deal is a key concern for the currency market. This has not just acted as a support in the US Dollar, it has created caution in EM currencies, including the rupee.
#2 Stop losses triggered: Analysts also indicated that a wave of stop-losses being triggered above the 90 level, especially from leveraged traders and option sellers who were defending that zone.
#3 Importer demand: Another key factor that seemed to put pressure on the currency is the steady importer demand, particularly from sectors like oil, metals, and electronics, which continues to absorb available dollar liquidity.
In the recent times rupee has been one of the worst performing Asian currencies having plummeted by more than 5% on a cumulative basis against the greenback. The currency’s depreciation has been driven by US tariffs of up to 50% on Indian goods which have hit the country’s export market as US is one of the largest consumer of Indian goods. Further, this has also diminished appeal of the local equities for foreign investors.
“The rupee marked its longest losing streak since July 2025, sliding 32 paise to a fresh record closing low of 90.19 against the dollar. Persistent foreign institutional outflows and lighter-than-anticipated central bank intervention ahead of the monetary policy committee decision on Friday allowed market dynamics to drive the currency lower,” Devarsh Vakil from HDFC Securities said
However, Anindya Banerjee, Head Commodity and Currency, Kotak Securities explained that “Despite the new high, the overall price action remains orderly, with the RBI stepping in selectively to smooth volatility rather than hold any specific level.”
Lack of intervention by RBI
Further, the downward pressure was also triggered by lack of intervention by the central bank. Some analysts say that a rate cut is highly unlikely owing to big GDP numbers and low inflation. However, according to a poll conducted by Financial Express, experts are divided with some expecting RBI to maintain the status quo again, while others see a possibility of a 25-basis-point rate cut this month.
The RBI’s MPC meeting which is underway will likely guide the currency’s future trajectory.
