The Indian rupee ended the week on a shaky note, falling to a record low of 88.26 against the US dollar on Friday. The decline of 11 paise from the previous close marks yet another milestone in a year when the domestic currency has struggled under the weight of global and domestic pressures. At one point during the day, the rupee dropped to 88.36 before recovering slightly as the Reserve Bank of India stepped in to prevent a deeper slide.

Currency traders and analysts said the immediate trigger for Friday’s fall was speculation that the United States was considering imposing fresh tariffs on the Indian IT sector. The rumor rattled markets, sending the rupee sharply lower. However, when the report was denied later in the day, some of the losses were pared. Treasury experts believe that the central bank played an active role in stabilising the exchange rate, intervening in the 88.30 to 88.35 range to prevent a sharper decline.

The rupee has already fallen by 3.3 percent in the current financial year, making it the weakest performing currency among major Asian peers. While the Taiwanese dollar has gained more than eight percent and the South Korean won has strengthened nearly six percent in the same period, the Indian rupee has remained under consistent pressure.

Market participants highlight that the weakness is not only a result of trade concerns but also a reflection of heavy foreign portfolio investor outflows. Overseas investors sold equities worth nearly 38,000 crore rupees in August and have already pulled another 3,300 crore rupees in the first week of September. This persistent capital flight has kept the rupee under strain despite the Reserve Bank’s interventions.

Adding to the challenge is the high demand for dollars from importers who need to cover their trade commitments. Oil companies and large corporates are said to have stepped up their purchases of the greenback, which has further pressured the rupee. Dealers believe that unless these flows ease, the currency will remain vulnerable.

The rupee had already breached the 88 mark for the first time last week following the announcement of a steep fifty percent tariff on Indian exports by the United States. The shock move unsettled investors and raised concerns about India’s trade outlook, setting the stage for further volatility. Economists now expect the currency to hover in the range of 88 to 88.75 in the near term. While the Reserve Bank is seen as determined to defend the 89 level, market watchers caution that the central bank cannot fully offset the pressures created by global trade tensions and heavy capital outflows.

For businesses, a weaker rupee means higher costs of imported goods and raw materials, while exporters may gain temporary relief from improved competitiveness abroad. For ordinary citizens, however, the fall could translate into higher prices for fuel, electronics, and other imported items. The volatility also creates uncertainty for investors and companies with international exposure, making it harder to plan ahead.

Currency experts stress that until the tariff issue is resolved and foreign investment flows stabilise, the rupee is likely to stay under pressure. They see 88.50 as the next crucial level, with traders preparing for a period of volatility in the coming weeks.

Closing Thought:
The fall of the rupee to a record low reflects the combined impact of global trade disputes, persistent foreign investor withdrawals, and strong domestic dollar demand. While central bank intervention has slowed the decline, the near term outlook remains challenging. Much will depend on how quickly trade tensions ease and whether investor confidence returns.

 

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