The Indian rupee tumbled to a fresh all-time low against the US dollar during Monday's trading session, reflecting a confluence of domestic and global pressures. The currency weakened by 34 paise to hit an unprecedented intraday level of 89.79 against the US dollar, continuing its recent downward spiral.
What Drove the Rupee's Historic Fall?
Forex market experts pointed to a perfect storm of negative factors. A strong US dollar globally and rising international crude oil prices created a challenging external environment. Domestically, foreign portfolio investors (FPIs) continued to pull money out of Indian equities, while importers' consistent demand for dollars added persistent downward pressure on the local currency.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, explained the multifaceted pressure. "The rupee has been under pressure as there has been heavy buying by FPIs taking out money, outflows happening as stakes were sold in various companies due to high valuations, oil buying, gold buying and repayments by corporates and central government," he stated.
Market Movements and Key Data Points
The rupee commenced trading at 89.45 at the interbank foreign exchange market before sliding to its record low. This follows a decline of nine paise on Friday, when it settled at 89.45. Notably, the currency had previously plunged to a lifetime low of 89.66 on November 21, making Monday's drop a breach of that recent threshold.
Supporting the bearish sentiment, domestic equity benchmarks Sensex and Nifty also retreated from their peaks by noon. The Sensex was down 122.58 points at 85,584.09, and the Nifty fell 46.35 points to 26,156.60. Data revealed that foreign institutional investors were net sellers, offloading equities worth ₹3,795.72 crore just on Friday.
Broader Economic Context and Outlook
The trade relationship with the United States remains a significant overhang. Bhansali noted that trade tensions persist, though a settlement is anticipated by year-end. This outlook finds some echo in official comments. On November 28, Commerce Secretary Rajesh Agrawal expressed hope for a framework trade deal with the US this year, which could potentially address tariff issues benefiting Indian exporters.
Negotiations have been lengthy, with an initial bilateral deal expected by fall 2025. However, tariffs imposed by the previous US administration have complicated the process. Meanwhile, global benchmarks reflected the headwinds: the dollar index was marginally up at 99.50, and Brent crude futures, the global oil benchmark, surged 1.96% to USD 63.60 per barrel.
The combination of capital outflows, expensive oil imports, and unresolved trade discussions suggests the rupee may face continued volatility in the near term, with market participants closely watching for intervention and policy cues.
