Rupee Breaches 88 Mark, Closes at All-Time Low Against US Dollar
The Indian rupee fell to a historic low, breaching the 88 mark for the first time to close at 88.09 against the US dollar. The sharp 51-paise decline is attributed to heightened trade tensions following the imposition of steep US tariffs on Indian goods, significant foreign fund outflows, and strong dollar demand from importers. The depreciation puts pressure on India's import-dependent sectors and could fuel inflation, impacting the broader economy and household costs.
Unpacked:
US tariffs make Indian exports more expensive, reducing demand for Indian goods in the US. This can lower export revenues, hurt companies reliant on the US market, and slow economic growth. In response, Indian firms may seek to diversify export markets, but in the short term, trade relations and economic stability are negatively affected.
Import-dependent sectors such as energy (crude oil), electronics, and automotive manufacturing are most vulnerable, as they rely heavily on imported raw materials or components. The increased costs from rupee depreciation can lead to higher prices for consumers and inflationary pressures.
The RBI can intervene in foreign exchange markets by selling USD reserves, adjust interest rates, and implement liquidity measures. While the RBI may tolerate some depreciation, it typically acts against sharp currency movements to maintain economic stability and control inflation.
Yes, in 2025 the rupee rebounded from record lows due to a weakening US dollar, return of foreign capital, and improved trade optimism. Key triggers included US GDP contraction and shifts in global investor sentiment, which reduced dollar demand and supported rupee recovery.