Rupee breaches 91 mark, falls to fresh all-time low vs dollar

The Indian rupee weakened further on Tuesday and touched a fresh all-time low of 91.05 against the US dollar in early trade. This is the first time the rupee has crossed the 91 level, highlighting sustained pressure on the local currency.

The fall in the rupee comes after it had already closed at a record low in the previous session. On Monday, the rupee ended at 90.74 against the US dollar on a provisional basis. This marked a sharp decline of 25 paise from its previous close.

Why the rupee is under pressure

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Speaking to Zee Business Managing Editor Anil Singhvi, market expert Ajay Bagga said India’s widening trade deficit is a key reason behind the rupee’s underperformance. He said exports have declined, partly due to the impact of higher US tariffs, while imports have remained elevated.

Bagga noted that portfolio flows have stayed negative. Foreign portfolio investors have been net sellers in recent months, while foreign direct investment has also remained weak. He said several foreign investors booked profits in recent IPOs, reducing capital inflows and limiting support for the rupee.

He added that among Asian currencies, the rupee has been one of the weakest performers, despite relatively strong macro fundamentals such as lower inflation and stable economic growth.

Role of imports and RBI action

According to Bagga, a significant part of the trade deficit is driven by higher imports of gold and silver. He said the Reserve Bank of India has managed volatility well so far, but persistent negative flows are keeping the currency under pressure.

On levels, Bagga said the 91 mark remains a strong psychological barrier for the rupee. However, he cautioned that if negative flows continue and RBI intervention remains limited, the currency could test these levels before stabilising.

Bagga said a US–India trade deal could improve market sentiment. He also stressed the need for structural reforms to attract long-term foreign capital. Higher foreign investment limits in sectors such as insurance and banking could help support the rupee over time.

He said recent policy moves allowing 100 per cent FDI in insurance could be a major long-term positive. Similar reforms in the banking sector, while maintaining regulatory control, could also boost capital inflows.

Bofa forecast

Separately, Bank of America said the recent slide in the rupee is driven by temporary distortions rather than structural weakness. The brokerage expects US dollar weakness next year to support mild appreciation in the rupee, with momentum picking up in the seasonally favourable first quarter. BofA forecasts the currency to strengthen to 86 per dollar by 2026.

BofA Securities added that sharp moves in the rupee, usually skewed towards weakness, tend to affect manufacturing and services sentiment and increase perceptions of policy uncertainty.