‘More demand for USD, limited INR use cases’: Expert explains why rupee has slid to 90 against dollar

The Indian rupee tumbled past the psychologically critical Rs 90 per US dollar mark on Wednesday, hitting a fresh record low of Rs 90.30, as uncertainty over the pending India–US trade deal and sustained foreign outflows battered market sentiment. The currency eclipsed its previous all-time low of Rs 89.94 registered just a day earlier, despite strong domestic macro data and moderating global dollar strength.

The rupee opened weak at Rs 89.96, sliding steadily through the session amid aggressive dollar buying by banks, firms rushing to hedge against further weakness, and persistent foreign portfolio outflows. So far in 2025, the rupee has depreciated 5.3%, making it Asia’s worst-performing major currency, even as the dollar index itself has fallen 8.5% this year.

Why the Rupee is falling

Investor and entrepreneur Akshat Shrivastava, in a detailed post on X, broke down the fall through a demand–supply lens. “Anything in the world falls because supply is more than the demand. While the government controls the supply of INR, the demand is more free market,” he wrote.

Akshat Shrivastava argued that the rupee’s weakness stems from a fundamental imbalance in global demand. He added that the dollar dominates simply because “it has more use cases”.

He explained that investors gravitate toward markets that offer growth. “People invest in stocks to chase ‘growth’. More growth investing options are in the US,” he noted. In contrast, he criticised the current Indian equity landscape: “Growth investing in India right now seems to be: collect SIP money, dump a percentage of it on crap IPOs, then do long-term, long-term — and give FIIs exit.”

On the debt side, Shrivastava highlighted why global capital prefers US assets during crises. “Every time there is more risk in the world, people flock to gold and stable fiat currencies like the US$, Swiss franc or SGD,” even if the US may “look unstable to a noob.”

He also pointed out that traders naturally prefer currencies that are widely acceptable and stable. “When you trade, the seller wants to be paid in a stable and useful currency. US$ tops the chart.”

Ease of capital mobility is another area where India falls short. “A person in the US can move a $1 million out easily. But a person in India can’t move ₹9 crore out easily,” he said, blaming “incompetent banks and crazy commissions” that discourage global investors.

Foreign investors also want predictable exchange rates. “If an investor puts money in India for one year, they hope the currency doesn’t move too much. Otherwise, they could simply buy BTC if they were okay with volatility,” he noted.

Shrivastava stressed that currency demand ultimately depends on what a country offers the world. He points to China as an example: “There is demand for Chinese renminbi because China is the best low-cost producer for a series of useful goods — from Diwali lights to Holi pichkaris to EVs.” India’s export basket, he argued, is still limited. “In India, the subset of such products is way too small.”

He concluded bluntly that policy choices are also weighing down the rupee. “If we are spending INR to push ladla-launda or berozgaar yuvati-type schemes, we are burning INR,” he said. “There is no macroeconomic gymnastics at play.”

Foreign outflows

Earlier in the day, veteran banker Uday Kotak said the rupee’s slide is being exacerbated by sustained selling from foreign institutional investors (FIIs) and private equity funds. “₹@90… the proximate reason: foreign selling of Indian stocks both FPI & PE under FDI,” he wrote on X. Domestic investors have been absorbing supply, but the Nifty’s dollar-denominated return is now zero over the past year, he noted, calling on Indian businesses to “shake out of their comfort zone.”

Foreign investors have withdrawn $16 billion from Indian equities so far this year, according to exchange data. Analysts warn that continued rupee weakness could deter further inflows and complicate India’s external financing.

Strong GDP, weak rupee

The currency’s decline comes despite India posting robust 8.2% GDP growth in Q2 FY26—its fastest in six quarters—and corporate earnings hitting their strongest levels in over a year. But high commodity import bills, tripling gold imports ($14.7 billion in October), and weak exports have widened the current-account deficit, keeping dollar demand elevated.

Analysts pointed to a rare alignment of pressures: lack of visible intervention from the Reserve Bank of India (RBI), delays in finalising the India–US trade deal, widening trade deficits, and renewed capital outflows. India’s external sector has also faced strain from strong import demand, record-high global commodity prices, and steep 50% US tariffs imposed on several Indian export categories.

What's ahead?

Economists say the effects are mixed. A weaker rupee may provide marginal relief to exporters, but risks fuelling imported inflation in a fuel-dependent economy. Market strategist Madan Sabnavis warned that currency markets tend to treat breached levels as new benchmarks. “Any mark breached for 2–3 days becomes the new benchmark. The market is talking of 91,” he said, though he expects a correction back to Rs 88–89 after the upcoming RBI policy review.

With intervention uncertain and global risk sentiment weak, currency traders expect volatility to remain high in the coming weeks—making the next RBI policy a crucial signal for markets.