The Indian rupee plunged to a record low, closing at ₹89.49 per US dollar on Friday, marking its steepest single-day decline since May. The currency slid by around 78 paise from Thursday’s close of ₹88.71.
Markets pointed to a confluence of global and domestic pressures — including mounting foreign portfolio outflows, inflation worries, subdued export growth and signs that the Reserve Bank of India (RBI) may have let the rupee drift past previously defended levels.
What Triggered the Sharp Decline?
✅ Portfolio Outflows & Global Risk Sentiment
Traders noted large capital withdrawals from Indian equities and a general shift away from risk assets. According to Reuters, foreign funds have pulled large sums from Indian markets in 2025, contributing to currency weakness.
✅ Trade & Export Concerns
India’s merchandise trade deficit widened with exports under pressure. Weak external demand and higher tariffs from trading partners added to the rupee’s burden.
✅ Reduced RBI Defence of Key Levels
Previously, the rupee found support near ₹88.80; the breach of that threshold suggests the RBI intervention may have been muted or delayed. A trader told Reuters the central bank appeared to step in only around ₹89.50.
✅ Global Dollar Strength & US Rate Outlook
A stronger US dollar and higher US bond yields make emerging market currencies like the rupee more vulnerable. Also, shifting expectations for Federal Reserve policy raise doubts about India’s capital inflows.
Why ₹89.49 is Significant
- It’s a psychological threshold: breaches of round numbers often lead to technical stops and trigger further selling.
- The fall of ~0.9 % in a single day marks an acute shock for a currency that has struggled to maintain stability this year.
- For import-heavy India, a weaker rupee increases the cost of dollar-denominated inputs, raising inflationary pressures.
Potential Impacts on Economy & Markets
🔴 Inflation & Cost Pressures
A weaker rupee makes imported goods — including fuel, electronics and raw materials — more expensive, putting upward pressure on inflation.
🔴 Corporate Earnings & Import Bills
Companies with high input costs or foreign‐currency borrowings may see margin strain. India’s heavy import reliance for crude oil means the weaker rupee adds to input costs for major sectors.
🔴 RBI Policy Implications
The RBI may face a trade‐off between responding to currency weakness and controlling inflation and growth. The central bank may weigh whether to resume interventions or let the rupee adjust gradually.
🔴 Market Sentiment
Investor confidence could be shaken. If outflows accelerate, equity and bond markets may face further pressure amid currency losses.
Outlook & What to Watch
- Watch for RBI commentary and data on its foreign‐exchange intervention.
- Trade balance data and export growth figures will provide clues on external pressures.
- Global risk sentiment, particularly US dollar strength and emerging market flows, will influence the rupee’s path.
- The next support region is seen around ₹89.50, with ₹90 looming as a major psychological barrier.
What Happened Today
- Rupee closed at ₹89.49/USD on Friday.
- It fell by 78 paise from the previous close.
- The drop was the steepest since May.
- Key thresholds like ₹88.80 were breached, triggering stop‐losses.
