Rupee Hits 90: RBI Boldly Tolerates a Softer Currency Amid Global Outflow Shock

Delhi: India’s rupee just hit a record low, and the Reserve Bank of India isn’t rushing to rescue it. Look closely, and the shift isn’t weakness. It’s a strategy.

The weaker rupee officially sits at the centre of India’s market chatter after sliding to 90.42 per dollar, its lowest level ever. The Reserve Bank of India allowed the drop, stepping back after months of heavy dollar-selling interventions. The currency has lost 5.5 percent so far this year, making it Asia’s worst performer. But the real story isn’t simply a falling rupee. It’s the RBI’s decision to let it breathe.

The phrase “Weaker Rupee” has dominated market screens, investment decks, and every trader’s morning coffee conversation. Why? Because the central bank just signalled a shift: it will now intervene only to tamp down volatility or crush speculative bets. It no longer intends to defend any specific level. In plain English, the RBI is letting fundamentals do the talking.

One source familiar with the central bank’s thinking put it bluntly: “It doesn’t make sense to spend reserves when fundamentally everything is against the currency.”

They’re right. Dollar inflows have dried up. Foreign investors have pulled out nearly 17 billion dollars from Indian equities this year. Foreign direct investment, offshore fundraising, and trade inflows have all slowed.

The math isn’t pretty.

A second source explained that the RBI adjusts the rupee’s path when real demand for dollars dictates it. With global conditions turning tough, India’s external sector is absorbing several shocks at once. A wider trade deficit, weaker export demand, and global risk-off flows have all ganged up on the currency. Letting it weaken naturally gives the central bank breathing room.

Still, the rupee’s slip below the psychologically loaded 90-per-dollar mark has stirred nerves. A third source said speculators might try to press their luck, but the RBI can crush those attempts fast if needed. That’s the part markets often forget: tolerance doesn’t mean surrender.

Investors On Alert

A weaker currency gives the RBI more policy flexibility, especially when growth remains strong at home. But it also poses a perception problem abroad. For global investors, currency stability is half the equation. When that goes wobbly, capital tends to get shy.

Sam Kongrad from Jupiter Asset Management didn’t sugarcoat it: a weakening rupee dampens enthusiasm for Indian equities. His firm is holding a “neutral weight” on India versus its benchmark. That’s a polite way of saying: great economy, shaky currency.

Others highlight the need for fresh external triggers. Kenneth Akintewe at Aberdeen Investments pointed to unresolved tariff tensions with the United States and the importance of India’s potential inclusion in global bond indices. Clarity on these factors could help restore foreign flows.

Yet long-term investors seem far more relaxed. India’s blockbuster GDP growth remains a powerful counterweight. The economy grew 8.2 percent in the July–September quarter while the rupee hit record lows. It’s a rare combination: a booming domestic engine paired with weak external demand.

India’s Chief Economic Advisor, V Anantha Nageswaran, dismissed the anxiety entirely. “I’m not losing sleep over it,” he said. He also noted that the weaker rupee hasn’t fueled inflation — a crucial point given India’s sensitivity to imported price shocks. He expects the currency to recover in 2026.

The Indian Context: Stronger At Home, Weaker Outside

Here’s where India’s story differs from typical emerging markets. A weakening local currency is usually tied to deeper domestic distress. But India’s situation is the reverse. The home economy is roaring. It’s the world outside that’s losing steam.

Domestic consumption is strong. Manufacturing is expanding. Services are powering ahead. More importantly, inflation remains under control. That gives both the government and the RBI more room to tolerate currency movements without triggering panic.

The external sector, though, is struggling. Exports are soft because global demand is weak. Imports remain high due to India’s investment cycle and energy needs. Add risk-averse global investors who are keen on the U.S. dollar, and the outcome is simple: downward pressure on the rupee.

The RBI’s strategy aligns with India’s broader economic ambitions. Rather than burning through reserves to protect an artificial level, the central bank is letting market forces calibrate the price. It’s a mature stance — one that signals confidence, not fear.

Will The Weaker Rupee Hurt India?

Short term, yes, it stings. Importers will feel the pinch. Investors get jittery. Headlines flash red.

But the long-term impact is far more nuanced. A softer currency helps exports stay competitive, which India badly needs as it seeks to scale manufacturing. It also nudges global investors to differentiate between noise and narrative.

And the narrative is still strong: India is delivering growth numbers that most large economies would kill for.

Where Does This Leave Markets?

In a classic wait-and-watch mood. Traders are bracing for intervention if volatility spikes.

Investors want clarity on U.S.-India trade tensions and global index inclusion. Businesses are monitoring import costs. And policymakers are quietly watching global risk trends.

The rupee may continue drifting, but unless speculative attacks or wild swings emerge, the RBI seems comfortable with its new hands-off stance. India’s currency story is never dull. But this phase feels different. It feels like the RBI is playing the long game.

Also Read: The Putin India Visit 2025 Sets a Fierce Geopolitical Tone