The Indian rupee plunged to a record low of 90.42 per dollar on Thursday, extending an eight-month decline and deepening its slide past the critical 90 mark.
The sustained pressure comes amid heavy foreign investor outflows, trade headwinds, and heightened speculative bets against the currency.
The latest fall surpasses Wednesday’s previous record of 90.29, cementing the rupee’s status as Asia’s worst-performing currency in 2025, down more than 5% year-to-date.
Much of the weakness stems from US tariffs of up to 50% on Indian goods, which have hurt exports to India’s biggest market and reduced the appeal of local equities. Dollar inflows via foreign direct investment and offshore borrowings have also slowed, depriving the economy of crucial support.
Speculative bets surge after break below 90
Traders say Wednesday’s break below the 90 psychological threshold emboldened speculative interest, driving a sharp rise in hedging costs across both the non-deliverable forward (NDF) and onshore forward markets.
Bankers noted a surge in cutting of “received positions”, arbitrage between onshore and offshore markets and importer hedging
The one-month forward premium jumped to 24 paisa, while the one-year implied yield climbed 18 bps to 2.64%, the highest since January 2025.
“The way the rupee broke past the 90 mark signals the pressure hasn’t eased,” said Amit Pabari, MD at CR Forex. “The pair may drift toward 90.70–91.00 in the near term.”
Trade deal uncertainty spooks markets
Market volatility has been amplified by delays in the US–India trade deal, with the head of treasury at HDFC Bank warning that the rupee could sink as low as 92 per dollar if no agreement emerges soon.
A broader look shows the rupee’s slide is tied to India’s weakening external position. The currency’s eight-month decline reflects a widening trade gap and lower investment flows, despite India retaining strong domestic growth momentum.
Current account deficit expected to worsen
HDFC Bank economists expect India’s current account deficit (CAD) to widen from 0.8% of GDP in the first half of FY26 to 1.4% in the second half, citing persistent dollar supply issues. Foreign investors have already withdrawn $17 billion from local equities this year, fueling further depreciation.
“If the trade deal happens soon, the rupee may stabilise quickly,” said Arup Rakshit of HDFC Bank. “Otherwise, it could hover between 90 and 92.”
Markets now watching RBI’s next move
The upcoming Reserve Bank of India (RBI) monetary policy decision on Friday is another source of suspense. Economists had previously anticipated a rate cut, but traders in the rupee swaps market have scaled back expectations following the currency’s sharp slide.
Rakshit noted that a rate cut now “has its own challenges with the currency,” highlighting the delicate balancing act facing policymakers.
Across Asia, most regional currencies were also under pressure, while the US dollar index held near 98.98 after recent labour market softness strengthened expectations of a US rate cut later this month.
For the rupee, however, the combination of external headwinds, investor outflows, and speculative momentum continues to drive the currency toward new lows, with traders bracing for more volatility ahead.
