Mumbai: The Indian rupee cratered to a fresh all-time low on Friday, breaching the psychologically significant 89 level against the US dollar for the first time, as relentless foreign portfolio sell-offs, stalled negotiations on a bilateral trade pact with the United States, and a notable retreat by the Reserve Bank of India from aggressively defending a prior threshold fueled the sharp depreciation.
Closing at 89.49 per dollar after touching an intraday nadir of 89.52, the currency marked its steepest single-day drop in six months, down 0.9%. This eclipsed the previous record low of 88.80 set earlier in the autumn, extending a bruising three-month slide triggered by escalating US tariffs on Indian goods imposed since late August.
Foreign investors have yanked out a staggering $16.5 billion from Indian equities year-to-date, with outflows accelerating amid fears that prolonged trade friction could erode export competitiveness and widen the current account deficit. Uncertainty over a potential US-India deal—seen as critical to easing tariff pressures—has kept markets on edge, while importers rushed to hedge dollar exposures.
The RBI, which had staunchly guarded the 88.80 mark through heavy interventions, appeared to ease its grip, allowing market forces greater play. Analysts view this as a strategic shift to preserve reserves amid fading Fed rate-cut hopes and a resilient dollar. A weaker rupee could bolster exports but risks stoking inflation via pricier imports, particularly oil. The currency also hit a record low of 12.60 against the offshore Chinese yuan.