Is 90 Rs Per Dollar the New Normal?

Mumbai: The Indian rupee on Wednesday slipped below the psychologically critical 90 per dollar level extending an eight-month decline as firm US dollar, uncertainty around the Indo-US trade deal and continued demand for dollars from importers and foreign investors weighed on the domestic unit. The slide is one of the quickest in recent times after the heady days of Taper Tantrum. Importers are praying for levels of 85-86 while exporters are hoping it to touch 100.

Since April 2025, the rupee has weakened sharply from Rs 85.51 to 90.30, marking a 5.6 per cent depreciation placing it among the weakest global performers this year and prompting questions about how much further the rupee might slide. The rupee’s slide comes against the backdrop of the three-day Reserve Bank of India’s Monetary Policy Committee (MPC) meeting that begins on Wednesday to decide on interest rates.

Relative to global peers, the rupee’s underperformance has been striking. Most major emerging-market currencies strengthened against the US Dollar over the same period, the Brazilian Real (5.85 per cent), Mexican Peso (9.56 per cent), South African Rand (9.66 per cent), and Russian Ruble (7.80 per cent). Even the Chinese Renminbi (2.80 per cent) fared better.

Ritesh Bhansali, deputy chief executive officer at Mecklai Financial, “This divergence illustrates that the rupee’s decline has been driven more by India-specific flows primarily due to sustained FII selling, elevated fiscal pressures and uncertainty around trade negotiations rather than a broad emerging market trend.”

According to estimates, around $45 billion worth of major Indian exports is expected to be impacted (mostly in labour intensive sectors) by the 50 per cent tariff imposed by US on Indian goods. Up to December 2, foreign portfolio investors have sold over Rs 1.48 lakh crore from equity market in 2025. The country’s merchandise trade deficit has hit a massive $41.7 billion in October 2025. Imports have soared to all-time high of $76.1 billion, 16.6 per cent year-on-year increase, mainly driven by surging gold imports for the festive season which has led to higher dollar demand from import dependent industries, putting pressure on the rupee.

Since April 2023, rupee has declined around 10 per cent and the Real Effective Exchange Rate reached the lowest level 97.40 in September 2025, which is 7-years low since November 2018. However, the RBI which till recently appeared determined to defend the rupee against a stronger dollar drawing down nearly $25-30 billion in reserves to curb the upside in dollar-rupee, now appears to have abandoned its defence. The dollar-rupee pair breached 90.00 level making new all-time low at 90.30 during the day. It finally settled at 90.21 down 25 paise from its previous close.

Says Anil Bhansali, head of treasury at Finrex Treasury said, “The way rupee has fallen it looks more like devaluation than depreciation possibly to compensate the exporters from losses incurred due to US tariffs.”

Looking ahead, markets are focused on the upcoming RBI MPC meeting. “With the rupee at historic lows and external balances under pressure, policymakers may adopt a more cautious stance to avoid intensifying outflows or weakening rate differentials further. Meanwhile, global factors such as elevated US yields, renewed volatility in Japanese Yen linked carry trades due to rising Japanese bond yields, and geopolitical developments including recent Putin visits continue to steer sentiment. Taken together, USD/INR remains technically firm above key moving averages, with broad expectations for a INR 88–91 range into FY26 and potential tests toward INR 90.80 if capital outflows persist,” says Bhansali of Mecklai Financial.

Meanwhile, the Chief economic adviser V Anantha Nageswaran said the government is not losing sleep over the declining rupee. The falling rupee is not affecting inflation or exports, he said on the sidelines of a CII event in New Delhi. However, he expressed hope that it would improve next year.