Rupee falls beyond 90- Last Wednesday, the Indian rupee reached 90 to 1 US Dollar due to increased selling by traders in response to slowing Asian economies and growing economic pressures. The increase in gold and silver imports has resulted in decreases in export dollar earnings from the US due to the imposition of tariffs of up to 50% by the US. The outflows of billions of dollars by FPI (Foreign Portfolio Investors) from Indian equities, along with the decrease in FPI demand for the rupee, all contributed to increased downward pressure on the exchange rate of the Indian rupee.
As a result of these factors, the Reserve Bank of India changed its strategy and has lessened its attempts to support the currency, which has further increased the downward pressure on it. As Dr. Pronab Sen pointed out, there was also a notable increase in gold demand, while Dr. Zico Dasgupta commented on the new strategy of the Reserve Bank of India.
RBI Strategy Drives the Rupee’s Sharp Slide
Steep tariffs imposed by the United States caused damage to the demand for Indian made exports, but the reduced demand from the US was offset by Indian exporters being able to develop new markets (and therefore generate revenue) with continued success. Despite successful developments, the factory’s output was weaker over the past few months. In September and October, there were extreme levels of gold purchasing caused by importers. A lot of domestic investors anticipate volatility, so many of them moved their savings from money to gold bullion. The movement of these funds out of the local currency caused a rapid draining of dollars out of circulation.
FPIs (foreign portfolio investors) have also withdrawn from the Indian equities markets and have now removed approximately US$17 billion in calendar year 2021-2022, which has increased the downward pressure on the value of the rupee, Rupee falls beyond 90.
The Reserve Bank of India reduced its levels of intervention in the foreign exchange market as of this year and has sold approximately $30 billion during the Devaluation of Currency shock and approximately $38 billion during the end of calendar year 2024. The RBI only sold about US$10.9 billion during the quarter from September 2025. The seen decline in the amount of funds the RBI sold signals a clear tactical shift in intervention tactics, as in Dr. Sen’s opinion, supporting the gradual depreciation of the rupee.
He believes that the slow movement of the rupee will give companies more time to make the necessary changes to contracts as necessary. Dr. Dasgupta, however, does not agree with Dr. Sen and warns that there is weakness in demand for exports from the USA, and thus the devaluation of the rupee may not be beneficial to increasing export sales.
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