Rupee Hits New Record Low of 89.92 Against US Dollar: What Lies Ahead?

The Indian rupee continued its downward slide and touched a new lifetime low of 89.92 against the US dollar on December 2, marking another sharp decline in the currency’s performance. The fall pushed the rupee past its previous all-time low of 89.7575, recorded just a day earlier on December 1. On the day, the rupee weakened by 0.3 percent, underscoring persistent pressure despite supportive domestic economic data.

Sharp Decline Despite Strong GDP Print

The currency’s decline on December 1 was particularly notable because it came on a day when Asian market cues were not exerting pressure, and India had just delivered a stellar gross domestic product (GDP) print. Even with these positives, the rupee continued to weaken, raising concerns about the underlying macroeconomic conditions.

As the currency hit fresh lows, Indian equity markets also reacted negatively, with benchmark indices trading 0.5 percent lower during the session.

A Break Below 89.5 Triggered Accelerated Selling

The latest slide accelerated sharply once the rupee broke below the 89.5 level, a mark that the Reserve Bank of India (RBI) had been actively defending. Once this level was breached, it triggered small stop-loss orders and prompted aggressive dollar buying from importers, adding more downward pressure on the currency.

Market participants noted that the breach of this defended zone indicated weakening support and raised expectations of further depreciation.

Weak Rupee Impacting FII Flows

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the persistent weakness in the currency has turned into a major dampener for foreign institutional investor (FII) flows.

He added that a fair trade deal between India and the US could help stabilise the rupee, but discussions around it have been delayed, and uncertainty continues to weigh on sentiment.

Also Read: RBI Imposes ₹91 Lakh Penalty on HDFC Bank for Compliance Lapses

Growing Trade Deficit Driving Pressure

Economists note that India’s widening trade deficit is expected to increase the current account deficit (CAD) in the ongoing fiscal year.
Based on HSBC forecasts, India’s CAD could rise to 1.4 percent of GDP this fiscal, compared to 0.6 percent last year, signalling continued pressure on the currency through the rest of the year.

Rupee Likely to Weaken Further, Say Analysts

Several currency experts now believe that the rupee may eventually slip beyond the 90 mark, driven by structural fundamentals and global demand for the US dollar.

Analysts at MUFG Bank suggest that fundamentals indicate further rupee weakness, and while the RBI may continue to intervene, the currency could still move past the 90 level over time.

Key Levels to Watch: Support and Resistance

Currency strategist Anindya Banerjee, Head of Research – Currency, Commodity and Interest Rate Derivatives at Kotak Securities, said the 90 level is a crucial psychological barrier for markets. He expects the RBI to remain active as the rupee approaches that threshold.

Banerjee outlined the key technical levels:

• Support zone: 88.80 – 89

• Upside trigger: Sustained trade below 88.80 would be needed to confirm a top

• If the rupee breaks above 90, the next level to watch is around 91.5

These levels suggest the rupee is likely to trade with heightened volatility in the near term.

Trade Deal Uncertainty Adding to Pressure

According to Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, ongoing uncertainty around the India-US trade deal has weakened market sentiment. While officials have indicated progress in discussions, markets are waiting for a final and concrete agreement to give the rupee meaningful support.

Trivedi noted that the lack of any notable RBI intervention in November allowed the rupee to weaken steadily without much resistance, contributing to the latest lows.

He added that the rupee is likely to remain under pressure within a range of 89.35–89.90 in upcoming sessions, indicating limited near-term recovery.

What Lies Ahead?

With the rupee now dangerously close to the psychological 90 mark, the market will remain sharply focused on RBI actions. Analysts expect the central bank to intervene more aggressively if the currency approaches or breaches the 90 level.

At the same time, macroeconomic fundamentals, trade deficit pressures, FII flows, and ongoing uncertainty over the US trade agreement are likely to define the rupee’s outlook in the coming weeks.

For now, markets remain cautious, equities have turned volatile, and the rupee continues to show signs of weakness despite strong domestic data.

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