Indian rupee plunges to record low as US dollar extends climb

The Indian rupee dropped to a record low on Friday, driven by increased dollar demand from maturing non-deliverable forwards and currency futures, according to Reuters. The sharp decline also triggered panic dollar buying by importers.

The rupee slid to an all-time low of 85.8075 against the US dollar before central bank intervention helped moderate the losses, traders reported.

By the end of the day, the currency settled at 85.5325, down 0.3 per cent, marking its steepest single-day drop since June 4, when unexpected general election results rattled markets. This week’s decline extends the rupee’s losing streak to eight consecutive weeks, with a 0.3 per cent loss for the week.

Concerns over India’s slowing growth and widening trade deficit have weighed on the rupee, compounded by the dollar’s strength amid the Federal Reserve’s hawkish policy stance and anticipation of US President-elect Donald Trump’s policies. The Indian rupee weakened to an all-time low. The currency has hit record lows in every trading session this week, pressured by broad strength in the dollar.

The rupee has set record lows for eight consecutive sessions.

The central bank’s absence earlier in the session in the face of strong dollar bids drove the rupee down sharply, traders said, prompting panic dollar buying from importers.

The rupee fell to its fresh all-time low level on Friday on the back of dollar buying related to the expiry of the December currency futures contract and maturing NDF (non-deliverable forward) positions as well as month-end dollar demand.

Sliding for the fourth straight session, the rupee on Friday hit its fresh all-time low of 85.80 per US dollar amid continued dollar strengthening and capital outflows from India. The domestic currency on Friday fell by a significant 53 paise to 85.80 to a dollar during the day before recovering and closing the day finally lower by 25 paise to its closing all-time low of 85.52 (provisional) against US dollar. The Indian rupee had closed at 85.27 closed in the previous session on Thursday.

The Indian rupee on Thursday declined by 9 paise to hit an all-time low of 85.24 against US dollar in the opening trade, amid higher US Treasury yields and a fall in most Asian peers. The 10-year US Treasury yield rose to the highest since late May on Tuesday.

Surging crude oil prices also pushed the rupee down further, according to analysts. Brent crude was trading higher by 0.38 per cent at 73.86 per barrel.

Meanwhile the Indian rupee weakened to its record low on Dec.20, hurt by persistent dollar strength after strong US economic data reinforced the Federal Reserve’s hawkish tilt while likely intervention by the Reserve Bank of India capped the currency’s losses.

The rupee declined to 85.10 against the US dollar in early trading, inching past its previous record low of 85.0850 hit on Dec.19, 2024.

State-run banks were spotted offering dollars, most likely on behalf of the RBI, traders said.

The rupee has stayed under pressure amid multiple headwinds, including India’s economic growth slowing to a seven-quarter low, a widened merchandise trade deficit and a hawkish turn in the Fed’s policy rate forecasts.

“Higher trade deficit along with slow growth figures puts rupee on test with outflows from domestic equity markets. For USD/INR, positionally 84.70 now acts as a good base while the door remains open for 85.50 levels,” said Kunal Sodhani, vice president at Shinhan Bank India.

Meanwhile the South Korean won hit a fresh 16-year low and the stock market tumbled on Friday amid increasing political turbulence, while other emerging Asian currencies fell against a strong dollar in thin year-end trade. Stocks in Seoul fell as much as 1.7 per cent in their third straight session of losses.

The won shed up to 1.2 per cent to hit 1,486.7 per U.S. dollar, its lowest since March 2009, as a majority of South Korea’s parliament voted to impeach acting President Han Duck-soo.

The impeachment threatens to further intensify the ongoing political crisis in the country, as the Constitutional Court met for its first hearing on suspended President Yoon Suk Yeol’s short-lived martial law declared on Dec.3. The won has lost nearly 13 per cent this year and is the worst performing Asian currency.

The US dollar held steady at a near two-year peak against major peers, after the Federal Reserve signalled slower-than-expected rate cuts in 2025. “If the Fed does not cut in 2025, or turns more hawkish in an extreme case, this may cause more dollar strength against Asia currencies,” Ng said. Higher US rates and the dollar’s yield advantage could drive capital out of emerging markets while weakening their currencies.