The Indian rupee closed at a record low for the third consecutive session on Thursday, weighed down by a robust U.S. dollar and month-end dollar demand from importers.
The rupee ended the day at 85.2625 per dollar, slipping further from its previous close of 85.20. Earlier in the session, it touched an all-time low of 85.2825.
“Importers were particularly active during the session, although trading volumes remained muted as we approach the year-end,” said a trader at a private bank.
Gradual Decline Reflects Persistent Challenges
The rupee’s journey from 85 to 84 unfolded over two months, while its descent from 83 to 84 took nearly 14 months. Since breaching the 84 mark in mid-October, the currency has been on a steady downward trajectory. Factors such as concerns over India’s economic slowdown, foreign outflows, uncertainties around U.S. trade policies under President-elect Donald Trump, and a hawkish stance from the Federal Reserve have contributed to the weakening trend.
The Reserve Bank of India (RBI) has actively intervened to cushion the rupee’s decline, yet the currency’s real effective exchange rate (REER) remains high. In November, the rupee’s REER—a measure of its value against multiple foreign currencies adjusted for inflation—was at 108.14, a multi-year high.
“This overvaluation suggests limited scope for significant appreciation in the rupee,” said Anil Bhansali, Head of Treasury at Finrex Treasury Advisors. “Any dip in the dollar-rupee pair is viewed as a buying opportunity, with the rupee likely to stay on a weakening trend.”
Dollar Strength Adds to Rupee’s Pressure
The U.S. dollar has strengthened against major global and Asian currencies, driven by rising U.S. Treasury yields and expectations of measured Federal Reserve rate cuts next year. Recent comments from Fed policymakers have hinted at fewer rate cuts in 2025 than previously anticipated.
Despite these headwinds, the RBI’s intervention has helped slow the rupee’s slide, providing a buffer against sharper declines. However, the currency’s future trajectory will depend on global and domestic economic developments.
