The Indian rupee reached a new all-time low on Friday due to diminishing hopes of a US Federal Reserve rate cut and ongoing uncertainty surrounding the US-India trade dispute. The currency fell below its previous record of 88.80, a level that the Reserve Bank of India had been actively supporting in recent times.
In early trading, the rupee declined to 89.45 against the dollar, marking its weakest level ever. On the interbank order-matching system, the currency experienced a sharper drop, with the latest quote hovering around 89.34.
Traders have been concerned about the rupee for weeks, partly attributed to the aftermath of significant US tariffs on Indian exports imposed in late August. Foreign investors have withdrawn nearly Rs 16.5 billion from Indian equities this year, causing the rupee to underperform compared to other major Asian currencies in 2024.
Market participants observed a reduced intervention by the RBI on Friday. While the central bank had previously intervened near the 88.80 level, traders noted a lack of support this time, leading to a faster decline in the rupee after breaching that threshold.
Increased demand for dollars from importers, coupled with subdued activity from exporters, further weighed on the currency. Traders described the sudden surge in trading volumes post the breach of 88.80 as driven by stop-loss orders, creating a market frenzy.
The future of the rupee remains uncertain amid fragile global risk sentiment and the anticipation of clearer signals from both the Federal Reserve and the ongoing trade talks between the US and India.