Rupee breaches 90 mark as tariffs and outflows weigh heavily

Rupee slips below 90 amid tariff pressure and capital outflows

Mumbai: The Indian rupee on Wednesday slipped below the key psychological mark of 90 against the US dollar, extending its downward trend of the past eight months. Persistent dollar outflows linked to trade and investments, along with companies rushing to hedge against further depreciation, have weighed heavily on the currency.

The rupee has emerged as one of Asia’s weaker performers this year, declining करीब 5% against the dollar. Steep US tariffs—reportedly up to 50% on certain Indian goods—have dented exports to its largest market, reducing the appeal of Indian equities for foreign investors.

Notably, the currency has depreciated from 85 to 90 in less than a year—much faster than its earlier move from 80 to 85—highlighting the growing pressure.

Foreign portfolio outflows have been significant, with investors pulling out nearly $17 billion from Indian equities so far this year. Alongside this, foreign direct investment (FDI) has also weakened. Although gross inflows touched $6.6 billion in September, large exits from IPO investments by private equity and venture capital firms have led to net outflows.

The Reserve Bank of India (RBI) noted that net FDI turned negative for the second consecutive month in September, mainly due to increased outward investments and repatriation.

India’s trade deficit also widened sharply, driven by higher gold imports and elevated US tariffs, adding further strain on the rupee. Additionally, inflows from external borrowings and NRI deposits have slowed.

Market participants say every phase of rupee depreciation—including the breach of the 90 mark—has triggered fresh dollar demand from importers, while exporters have held back dollar sales. This imbalance has left the currency vulnerable amid insufficient capital inflows.

Experts suggest that a gradual weakening of the rupee can act as a natural stabilizer for the economy under higher tariff conditions.

Ongoing uncertainty around India-US trade talks has further disrupted forex markets, increasing hedging activity by importers while exporters remain cautious, forcing the RBI to manage volatility.

Despite intermittent interventions by the central bank, sustained dollar demand and capital outflows continue to exert pressure. RBI’s efforts are reflected in declining forex reserves and a rise in forward dollar positions, which recently touched a five-month high of $63.4 billion.