Will the Rupee Cross 90? RBI’s Dollar Defense Kicks In

The Indian rupee slumped to an all-time low of 89.85 versus the US dollar on Monday, pressured by persistent dollar demand, an expanding trade deficit, and uncertainty over stalled India-US trade negotiations. The drop marked a new record for the rupee, breaking closely previous lows observed in recent weeks. Despite India’s strong GDP growth reports, external economic factors weighed heavily on the currency.

Facing this decline, the RBI stepped into the market to support the rupee by selling dollars through state banks, aiming to prevent the rupee from breaching the psychologically significant 90 level. Traders observed this intervention as a calibrated response to curb rupee volatility rather than a complete defense. The intervention came amid a broader trend of the rupee weakening against major currencies in 2025.

The RBI’s foreign exchange reserves and forward book expansions provide it adequate ammunition to manage the currency markets. However, experts warn that rupee pressure may persist due to underlying trade imbalances and global economic uncertainties.

Key Highlights:

Rupee dropped to a historic low of 89.85 to the US dollar.

RBI intervened by selling dollars to prevent the fall past 90.

Weak trade flows and stalled India-US trade deal pressured the rupee.

Intervention described as measured, focused on reducing volatility.

Rupee among the worst performers globally in 2025.

Strong domestic GDP growth failed to offset external pressures.

RBI’s forex reserves and forward contracts enable market intervention.

Source: The Economic Times, Reuters, Moneycontrol, Hindustan Times, Bloomberg​