The Indian rupee extended its downward spiral on Thursday, breaching a critical psychological barrier to touch a fresh all-time low against the US dollar. The domestic currency's persistent weakness highlights mounting pressures from global capital movements and trade uncertainties.
Rupee's Sharp Decline and Market Opening
The local unit commenced trading on a weak note, opening 17 paise lower at 99.36 compared to its previous close of 99.19. The selling pressure intensified rapidly in early morning trade, pushing the rupee to plunge to a new historic low of 90.43 against the American dollar. This marks a significant depreciation, continuing the slide that saw it cross the 90 mark just a day earlier.
Key Factors Driving the Currency Down
Analysts point to two primary headwinds battering the rupee. First, the continued delay in finalising a trade deal between India and the United States has dampened investor sentiment. Second, and more impactful, are the relentless outflows from Foreign Portfolio Investors (FPIs).
So far in this calendar year, FPIs have sold a staggering Rs 1.52 lakh crore worth of Indian shares. The selling has not abated in December, with data showing an offloading of Rs 8,369 crore in equities in just the first three days of the month. This steady exodus of foreign capital creates sustained demand for the US dollar, directly pressuring the rupee's value.
Expert Analysis and Future Trajectory
Currency experts have painted a cautious near-term picture. Dipti Chitale, CEO of Mecklai Financial Services Pvt Ltd, noted that the USD/INR pair is testing the upper boundary of its rising channel. "A sustained break above 90.30 could open room toward 90.50 and 91.00," Chitale said, indicating the potential for further weakness. She identified immediate support at 89.20.
Amit Pabari, Managing Director of CR Forex, offered a stark assessment linking FPI flows to currency strength. "A depreciating currency rarely attracts global investors — and this year proves it painfully well. Every exit drains confidence — and the currency pays the price," Pabari stated. He warned that the breach of the 90 mark signals unabated pressure, with the pair potentially drifting toward the 90.70–91.00 zone in the near term.
Official Stance and Market Watch
Despite the market turmoil, official commentary has sought to project calm. Chief Economic Advisor V Anantha Nageswaran said on Wednesday that he was "not losing sleep" over the rupee's decline, expressing confidence in a recovery next year. He added that the slide was not currently impacting inflation or exports significantly.
Market participants are now keenly awaiting remarks from Reserve Bank of India Governor Sanjay Malhotra during his monetary policy address on Friday for any signals on the central bank's stance regarding the currency volatility.
In a related perspective, Pranjul Bhandari, HSBC’s Chief India Economist, suggested that in the context of recent US tariff impositions, currency depreciation could act as the "perfect medicine" to bolster India's services exports by making them more competitively priced globally.
