Indian Rupee Plunges to Historic 89.48 per Dollar

The Indian rupee plunged to an all-time low on Friday, triggering a wave of market panic after the Reserve Bank of India (RBI) unexpectedly refrained from intervening to support the currency. 

Traders, already rattled by delays in a long-anticipated trade agreement with the United States, rushed to unwind positions as the rupee breached key levels that many believed the central bank would defend.

The currency sank 0.9% to 89.48 per dollar, accelerating sharply once it slipped beyond the psychologically critical 89 mark, a threshold widely assumed to be a red line for the RBI.

The unexpected inaction set off a scramble in both onshore and offshore markets.

“There was real panic in the market,” said Dilip Parmar, FX analyst at HDFC Securities in Mumbai. “Most participants were convinced the RBI would step in at 89. This time, it didn’t.”

According to Anindya Banerjee of Kotak Securities, traders rapidly closed bearish bets on the dollar, amplifying volatility.

The central bank had repeatedly sold dollars in recent weeks to smooth excessive rupee swings, including heavy interventions in mid-October that briefly lifted the currency. But those moves came at a cost, draining rupee liquidity from the banking system and cutting India’s foreign-exchange reserves.

The rupee’s slide came just a day after RBI Governor Sanjay Malhotra expressed optimism that currency pressures would ease once India clinched a “good trade agreement” with the United States. But the continued lack of clarity, and rising uncertainty around timing, has only deepened market anxiety.

Data released after Friday’s market close showed foreign-exchange reserves have fallen by nearly $10 billion since mid-September, underscoring the scale of recent interventions.

Some analysts believe the RBI may now be reluctant to burn further reserves defending a single price level.

“It looks like the RBI has stepped aside amid surging demand for dollars,” said Dhiraj Nim of Australia and New Zealand Banking Group. “With no clarity on the trade agreement, the central bank may not want to keep fighting the market.”

Sentiment has also been hurt by U.S. tariffs of 50% on Indian exports, the highest levied against any major Asian economy, and by uncertainty over the bilateral negotiations. While India has signaled progress in recent weeks, traders remain cautious.

The rupee has now become Asia’s worst-performing currency in 2025, losing 4.3% of its value against the U.S. dollar.

Analysts expect increased volatility in the days ahead, though Nim forecasts the currency may stabilize around 89.40 if the RBI signals readiness to step back in, or if trade talks gain traction.