Rupee Tumbles Past 90: RBI Rate Cut Fails to Stem Slide

The Indian rupee closed Friday at 89.98 against the US dollar, a level that belied the Reserve Bank of India's (RBI) efforts to stabilize the currency. Despite a 25 basis point rate cut and liquidity measures totaling Rs 1 lakh crore, the rupee saw limited recovery. Persistent foreign institutional investor (FII) outflows, stalled trade negotiations with the United States, and escalating bullion prices continued to weigh on its performance, causing it to briefly surpass the 90-mark.

In response to market concerns, the RBI announced open market operations involving the purchase of government securities worth Rs 1 lakh crore and a $5 billion dollar-rupee buy-sell swap. Governor Sanjay Malhotra clarified these actions were liquidity measures, not direct currency support, emphasizing the central bank's stance against targeting specific price levels. He noted that while abnormal volatility is addressed, market forces primarily determine currency prices in the long run.

Over recent months, the Indian rupee has emerged as one of Asia's worst-performing currencies, having lost approximately 5% against the US dollar. This depreciation is largely attributed to the slowdown in trade discussions with the US and continuous outflows of foreign equities from Indian markets, creating a challenging environment for the local currency.