'Market forces' push Rupee to record low near 88 per dollar, RBI Governor 'not targetting' any level

Rupee

The Indian Rupee veered closer to the 88 mark against the US dollar on February 10, adding to the selling pressure in equity markets as well, and bringing RBI Governor's stated position in focus of 'not targetting' any specific exchange rate level or band.

The local currency ended at 87.48 against the US dollar today, as compared to 87.43 against the greenback at previous trading session. In the early trade today, Indian rupee touched a new record low at 87.9563 against the US dollar due to introduction of new tariff plans of U.S. President Donald. The local currency opened at 87.9175 against the US dollar.

During the media briefing after the MPC last week, Governor Sanjay Malhotra had underscored the RBI’s existing position on Rupee, and said, "Our stated objective is to maintain orderliness and stability, without compromising market efficiency."

However, a sharp slide of over 3% in Rupee since December 2024 prompted a view within the currency market that the central bank is willing to ease its hold on the Rupee, unlike his predecessor. The Indian Rupee has been reeling under selling pressure and hitting fresh lows due to a strengthening of the dollar.

"...Our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian Rupee is determined by market forces," Governor Malhotra added.

RBI Governor added that the Indian economy, though continuing to be strong and resilient, did not remain immune to global headwinds, with Rupee coming under depreciation pressure in recent months. “At the Reserve Bank, we have been employing all tools at our disposal to face the multi-pronged challenges,” said the Governor.

The presence of RBI in the foreign exchange market has made Indian rupee least volatile among Asian peers. Between April and November 2024, the central bank sold gross dollars worth $195.568 billion, and the Indian rupee during this period was in range of 84-86 against the dollar.

According to Bloomberg data, the Indian rupee has depreciated 3.2 percent since the appointment of the new RBI governor. The rupee has been on the depreciation path for last few months owing to various factors like widening trade deficit, rising crude prices, and a surge in the dollar index after the US Federal Reserve hinted at fewer rate cuts in 2025. India's sluggish growth in Q2FY25 and foreign investor outflows from equities too contributed to Rupee's weakness.

In the first nine months of FY25 (up to 6 January, 2025), the INR depreciated a modest 2.9%, performing better than currencies such as the Canadian Dollar, South Korean Won and the Brazilian Real, which depreciated by 5.4%, 8.2% and 17.4% respectively during the same period, the Economic Survey 2025 had reported.

Read more here on Economic Survey's INR assessment.

The survey had said that one of the primary factors behind Rupee's depreciation in 2024 has been the broad-based strengthening of dollar, at a time of geopolitical tensions in the Middle East and uncertainty around the US election.

Between October to January this fiscal, the Indian Rupee emerged as least-volatile against the US dollar, among its Asian and global peers. Data showed that the rupee is among the fourth-least volatile currencies in Asia. It is also among the second-least volatile currency against the Japanese Yen, British Pound, Euro, and the Chinese Yuan, during October to January.