Rupee slips to record low as amid uncertainty over global economy, India-US trade deal

The Indian rupee tumbled to a lifetime low on Friday, dragged down by heavy portfolio outflows, uncertainty around a potential United States–India trade deal, and what traders described as a softer defence of the currency by the Reserve Bank of India (RBI).

After a steady start to the day, the rupee slid past the 89.5 mark to touch a new all-time low. Bloomberg data showed the currency falling as much as 83 paise to 89.54 before trimming losses to close 79 paise weaker at 89.49 — its worst session since 8 May 2025. The rupee is now down 4.53 per cent this year, making it the weakest major currency in Asia.

RBI says no target level for the rupee

The sharp decline followed comments from RBI Governor Sanjay Malhotra, who reiterated on Thursday that the central bank does not target a specific exchange rate and that recent weakness reflected stronger demand for dollars. India’s foreign-exchange reserves, he said, remain “very good” and provide ample cover.

He added that pressure on the currency should ease once New Delhi concludes a trade agreement with Washington.

Sanctions, tariffs and trade worries weigh on sentiment

Analysts highlighted several factors behind Friday’s fall. Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP, said the rupee was pressured by United States sanctions on an Indian firm dealing with Iran, a widening trade deficit and delays in the bilateral trade deal.

The slide to 89.49 pushed the currency beyond its previous record low of 88.80, hit in late September and again earlier this month. Friday’s intraday fall of 0.9 per cent was the sharpest since May.

More from World

Despite Trump tariffs, robust domestic economy gives India leverage over US in trade talks: Report Trump weighs sanctions and Pentagon action to force Nigeria to protect Christian communities

The rupee has been under strain for the past three months, ever since steep United States tariffs on Indian exports took effect in late August.

Although domestic economic fundamentals remain strong and equity markets are near record highs, the tariffs have hurt trade flows and pushed India’s merchandise trade deficit to an unprecedented level. Exports to the United States fell nine per cent year-on-year, while foreign investors have withdrawn 16.5 billion dollars from Indian equities in 2025 — among the largest outflows recorded across emerging markets.

Economists warn of back-to-back BoP deficits

Citi economists noted: “An early trade deal is important for a recovery in export order momentum, which remains below January to July levels as per PMI data.”
They expect India to post a five-billion-dollar balance-of-payments deficit in FY26, which would mark the first instance of consecutive BoP deficits since 1991.

FX strategists said importers have stepped up hedging in recent weeks, while exporters remain largely inactive.
According to ANZ strategist Dhiraj Nim, “89.50 is the new resistance for now,” adding that “the RBI seems to be relenting to a market that has been short INR for quite some time.” He said a favourable trade deal could materially pull USD/INR lower.

Quick Reads

View All

Inside China’s plan on ‘world-first floating artificial island’ that can resist nuclear blasts

Watch: The video that got Trump calling for hanging of Democrats

Rupee hits record low against Chinese yuan

The rupee also touched a record low of 12.60 against the offshore Chinese yuan on Friday, extending its year-to-date decline in that pair to eight per cent.