Rupee at 90 against dollar? What’s behind weakness, outlook & key catalyst

The rupee took a breather on Monday, opening 26 paise higher against the dollar after sliding to a record low of 89.49 on Friday. Currency analysts noted that multiple triggers are at play and suggested the local currency could weaken further. The recent weakness reflected a classic mix of balance-of-payments strain and global risk aversion, they said.

MOFSL noted the global risk-off tide weighed heavily on the rupee as marquee risk assets unraveled, with Bitcoin and Ethereum ETFs logging outflows of $3.8 billion in November 2025 so far, marking an all-time monthly high.

"As crypto and AI‐heavy tech stocks plunged, global portfolio rebalancing sought safety in USD, triggering broad capital outflows from emerging currencies, including INR. Declining risk-asset valuations triggered liquidations in hedge funds, increased the global selloff of Indian equities, and prompted emerging market investors to repatriate USD proceeds — intensifying INR depreciation pressure," MOFSL said.

YES Bank in a note said once the RBI allowed the USD/INR to trade beyond the 88.80 levels, markets started covering short positions and this led to the currency to depreciate beyond 89 level. It said the central bank also continued to hold significant short positions, and rupee can depreciate if the RBI were to decide to not roll these over.

"Guessing the end-March levels would be difficult as the rupee has now moved into the uncharted territory, but we think that it may be capped at 90," it said.

MOFSL said India's external metrics also turned challenging just as global pressures mounted.

It expects rupee to remain biased towards the 90-mark in the near term unless a credible catalyst emerges. The only credible catalyst to soothe the market nerves is a favorable trade deal between the US and India, it said. 

MOFSL noted that the merchandise trade deficit widened to a record $41.7 billion in October 2025, owing to a 200 per cent festive-led surge in gold imports (to $14.7 billion) and an 11.8 per cent drop in merchandise exports (to $34.4 billion), including an 8.6 per cent fall in US exports.

"At the same time, the RBI reportedly intervened only selectively, choosing not to fully defend INR in favor of reserve preservation. With importers increasing hedging (to $43b/month vs. exporters $25b) amid unresolved US-India trade deal uncertainty, USD supply in India remains weak," it said.