Rupee Falls to ₹91.45 per Dollar: What’s Causing the Decline?

Synopsis: Rupee hits record low of Rs 91.45/$ amid FII selling, rising US yields, global risk-off mood, US-India trade deal uncertainty, and cautious bets ahead of Union Budget.

The Indian rupee slid to a record low of about 91.45 against the dollar, which essentially means that Indians need more rupees now in order to get 1 dollar. Typically, such a decline takes place when global investors fear the situation around them, and hence they start buying safer currencies like the dollar. When the dollar appreciates, the majority of the other currencies, including the rupee, depreciate.

Key Drivers

A large part of the blame can be placed on foreign investors selling Indian equities. When FIIs sell shares, they bring their money out of India and hence convert rupees into dollars. This causes additional demand for dollars, and as the demand rises, the dollar becomes more expensivethus the rupee loses value.

Also, High US bond yields are another significant factor. US government bonds are considered extremely safe. When their yields go up, global investors switch their funds to the US to get higher returns. This results in an increase in the dollar’s value and a decrease in the value of emerging market currencies such as the rupee.

Moreover, global developments have an impact as well. Renewed trade frictions and geopolitical uncertainties (such as new tariff threats and world conflicts) get investors worried. During such times, people tend to stay away from risky assets and thus prefer to keep their money in dollars. This risk of sentiment damages the rupee even if India’s economy is on the right track.

Furthermore, uncertainty over the US-India trade agreement was another factor that caused the rupee to depreciate. Whenever trade negotiations get postponed or there is no clear update, investors start to get concerned about the future of business, such as exports, imports, and overall growth. This results in a drop in market confidence and foreign investors turning more cautious, which in turn puts more pressure on the rupee.

Moreover, it is a common pattern for the rupee to remain weak before the Union Budget as the markets opt for a wait-and-see approach. Until the government’s announcement, such as taxes, spending plans, subsidies, and support for industries, investors are reluctant to take major risks. This hesitant sentiment leads to a lack of new purchases and makes the foreign exchange market jittery, thus creating more pressure on the rupee.

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