The Indian rupee witnessed a sharp decline on Tuesday, weakening by 36 paise to breach the psychologically significant level of 91 against the US dollar for the first time in intraday trading. This drop marks a continued downtrend, with the currency falling from 90 to the dollar over the past ten trading sessions, including a 1% fall in just the last five.
What's Driving the Rupee's Fall?
Foreign Portfolio Investors (FPIs) have been major sellers in the Indian equity markets, pulling out more than $18 billion so far in 2025. This makes India one of the worst-hit emerging markets in terms of portfolio outflows. The sentiment has been dampened by slowing corporate earnings, high stock valuations, and the lack of listed AI-focused companies in India compared to global peers.
Adding to the pressure is the uncertainty surrounding the India-US trade agreement and the steep tariffs imposed by the US. Furthermore, fresh trade tariffs of 50% on Indian goods by Mexico and a record trade deficit are contributing to the rupee's weakness, according to Rahul Kalantri, VP Commodities at Mehta Equities Ltd.
RBI's Strategy and Market Impact
Analysts note that the Reserve Bank of India's (RBI) intervention strategy has changed. Kunal Sodhani, Head of Treasury at Shinhan Bank, pointed out that the RBI's substantial short USD forward position of $63 billion as of end-October 2025 has shifted its intervention away from the spot market. This has reduced the central bank's willingness to sell dollars aggressively, leaving the rupee more exposed to flow-driven pressures.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, suggested this might be a deliberate strategy. "This can be a deliberate strategy to make India’s exports more competitive in the context of Trump tariffs," he said, adding that with November's trade deficit narrowing to $24.53 billion from October's $41.68 billion, there is no immediate cause for alarm.
Can the Rupee Hit 100 Against the Dollar?
The prospect of the rupee sliding to 100 per US dollar by March 31, 2026, is viewed as an extreme scenario, not the base case. Akshat Garg of Choice Wealth explained that such a 10% depreciation in a short period would require a "perfect storm"—a sharp global dollar rally, persistent portfolio outflows, and adverse trade shocks like a spike in oil prices.
On a positive note, a weaker rupee benefits exporters, particularly in the IT sector. An index tracking IT stocks has gained roughly 14% since the end of September, coinciding with the period of accelerated currency depreciation.
In the immediate future, experts anticipate the rupee to trade in the range of 90-92 against the dollar, with its trajectory heavily dependent on global cues, FII flows, and the outcome of key trade negotiations.
