Rupee’s fall driven by global cues and trade uncertainty
The Indian rupee hit a fresh record low of 90.48 per dollar, slipping nearly 0.5%, but the decline is not alarming, says Naveen Mathur. He calls it a “calibrated move,” primarily triggered by hawkish signals from the US Federal Reserve, persistent uncertainty over the India–US trade deal, and continued foreign fund outflows.
Despite strong domestic fundamentals, the rupee has weakened over 6% year-to-date—making it one of the worst-performing Asian currencies.
Fed’s stance adds pressure on emerging market currencies
According to Mathur, the Federal Reserve’s decision to stay data-dependent and signal only one potential rate cut next year has created a negative bias for emerging market currencies, including the rupee. The global environment has pushed importers to increase dollar purchases, further weighing on the exchange rate.
Unresolved US trade deal remains a key overhang
A significant drag on the rupee, Mathur notes, is the lack of progress on the India–US trade deal, especially amid the 50% punitive tariffs imposed by the US—critical for India given its reliance on Russian oil imports.
While negotiations are ongoing, reports suggest that a deal may not be finalised before March. The delay is hurting sentiment and dollar inflows.
RBI likely to defend the 90–91 range
Mathur believes the RBI will intervene if needed to prevent the rupee from slipping beyond 90.5–91, even though it may allow limited depreciation to maintain currency competitiveness. He emphasises that India’s macroeconomic fundamentals—including 8.2% and 7.8% GDP growth in the first two quarters—do not justify the steep fall in the rupee.
Strong fundamentals vs. Short-term volatility
While the rupee has been dragged by global volatility and geopolitical developments, Mathur reiterates that the long-term outlook remains strong. He expects the currency to stabilise between 90 and 91, provided there are no major negative surprises on the trade or geopolitical front.
“These are blips in the broader geopolitical landscape. The structural trend for India is still positive,” he concludes.