The Rupee felt like it was falling off a cliff. On Friday, it crashed to $89.48. That close-call to 90? It’s a psychological marker. It’s fear.
And then Monday happened. A slight bounce back to $89.16. Why? Because the Reserve Bank of India (RBI) got absolutely aggressive. They stepped in. They sold dollars—they threw dollars at the market, let’s be real—to stop the freefall. X was the sharp drop on Friday. And then Y followed: the RBI had to intervene strongly.
The thing is, the pressure is still there. The RBI was trying to defend the $88.80$ line for weeks, according to the bankers. They couldn’t hold it. The dam broke.
The Four Reasons Why the Rupee is Bleeding:
This isn’t just one problem. It’s a whole knot of trouble.
The Big Trade Deal That Never Comes: RBI Governor Sanjay Malhotra said the decline is mainly dollar demand. He’s betting on an India-U.S. trade agreement to ease the pressure. But what draws people there? Investor sentiment stays fragile because the timelines are totally unclear. The deal is perpetually ‘maybe next month.’
The Dollar Index is a Monster: The U.S. Dollar is too strong. It hit a near six-month peak. When the dollar index moves past $100$, it crushes everything else, including the Rupee. Domestic flows—money moving into India—offered minor support, or nothing. The global momentum is just tilted against us.
The Fed’s Game: Everyone thought the U.S. Federal Reserve was done with rate cuts. Now, analysts think they might deliver another one. Expectations keep shifting. And then the dollar and bond yields shoot up fast, and the Rupee gets hammered. This year alone, the Rupee depreciated by $4.59\%$. It’s ongoing damage.
The Trade Deficit Mess: Here’s the kicker. Our country’s trade deficit—we import more than we export—hit a record high last month. Shipments to the U.S. dropped because of new tariffs. That means we have fewer dollars coming in, and we need more dollars to buy stuff outside. Net financial flows are weak. And then the Rupee depreciates. It’s the weakest currency in Asia this year. That drives foreign investors out.
The RBI is containing the volatility. But the underlying reasons? They haven’t been fixed. The currency is struggling.
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