Rupee Cracks 90.80 Mark, Slumps to Fresh Record Low; Dollar Demand, FPI Outflows Drag INR

The rupee weakened to a fresh all-time low in early trade on Tuesday, slipping to 90.82 against the US dollar, as multiple global and domestic pressures are still weighing on the currency. Tariff concerns, the absence of a US-India trade deal, along with the strong dollar demand, have kept the rupee under sustained pressure.

So far in 2025, the rupee has depreciated nearly 6%, becoming one of the weaker-performing emerging market currencies this year.

Rupee Hits New Lows Amid Rising Dollar Demand

On Monday, the rupee had already closed at a record low of 90.74 against the US dollar, after a sharp 25-paise decline from its previous close. The weakness extended into Tuesday's session as importers continued to buy dollars aggressively, while foreign portfolio investors (FPIs) maintained their selling streak in Indian equities and debt, which has left the rupee vulnerable to further downside in the near term.

Trade Deal Uncertainty Adds to Rupee Pressure

A key factor hurting sentiment is the delay in finalising a US-India trade agreement. According to a report by Finorex, the uncertainty around the trade deal has clouded any meaningful recovery in the USD/INR pair, even as India's trade deficit has narrowed.

As noted in the report, "Even a $17 billion reduction in trade deficit could not bring about a recovery in the rupee with FPIs continuously buying dollars by selling equity and debt. More importantly, it is the negative sentiment that is building up due to the non-signing of the deal. Yesterday, the deal with South Korea was signed and completed, but for Indi,a it is so near yet so far. Today, the buy/sell swap of $5 billion will be conducted by the RBI amidst tight liquidity conditions. 90.95 should be a resistance for the pair, while there is a support at 90.50."

Rupee Performance Against Major Global Currencies

The rupee has also weakened sharply against other major global currencies.

Against the euro, the rupee slipped to around Rs. 106.65 per EUR. Against the British pound, the exchange rate hovered near Rs. 121.38 per GBP. The rupee also weakened against the Japanese yen, although one rupee still holds a higher face value than one yen.

Compared to other Asian currencies, the Indian rupee has underperformed the Chinese Yuan (CNY) and Indonesian Rupiah (IDR) but has remained relatively stronger than the Japanese Yen (JPY) and South Korean Won (KRW). Analysts say India's currency is facing unique pressure due to capital outflows and trade-related uncertainty, even as some Asian peers benefit from stronger export momentum.

According to the Finorex report, the Reserve Bank of India (RBI) is closely monitoring the rupee's movement but appears to be allowing a gradual depreciation rather than aggressively intervening.

With foreign investor outflows continuing, high dollar demand, and no immediate clarity on the US-India trade deal, the rupee is likely to remain under pressure in the near term.

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