On Monday, the Indian rupee fell to a historic low, impacted by maturing non-deliverable forward positions and continued negative sentiment, as India remains one of the few major economies without a trade agreement with the US.
The rupee dropped to 89.7575 during the session, closing at 89.5475, marking a 0.1% decline for the day.
Despite India’s position as the world’s fastest-growing major economy, trade and investment flow weaknesses have pressured the rupee this year, even as local stock indices have reached record highs recently.
Traders noted that the maturity of significant positions in the NDF market weighed on the rupee Monday, but central bank interventions to sell dollars helped it stay above the crucial 90 level.
Data released Friday post-market hours revealed that the Reserve Bank of India’s short forward dollar positions increased to $63.6 billion in October, highlighting its intensified measures to support the rupee.
ANZ noted, “Goods export growth is slowing, and if high tariffs persist, risks to India’s growth, current account, and balance of payments will increase, likely necessitating further rupee weakening.”
The firm predicts the rupee could weaken to 91.30 by the end of 2026 if the current tariffs of up to 50% on Indian exports remain. A trade deal reducing tariffs to 15-20% could trigger a rally to 88-88.50, but the RBI might intervene to bolster FX reserves, the note added.
As of November 21, India’s foreign exchange reserves were $688.1 billion, according to central bank data.
The rupee’s weakness also led to an all-time low of 12.69 against the offshore Chinese yuan on Monday. The dollar index slightly decreased, while Asian currencies showed mixed performance.
