The Indian rupee fell past the 95-per-dollar mark for the first time on Monday, touching a record low of 95.14 against the US dollar. The slide came after early gains quickly faded, as strong demand for dollars from importers and arbitrage trades by companies weighed on the currency. The rupee had opened sharply stronger at 93.60, rising more than 1%, but failed to hold those gains through the day amid shifting market dynamics and regulatory-driven positioning.
Sharp Reversal In Trade
Traders said the early rally was undone by a mix of regulatory changes and opportunistic trades. The Reserve Bank of India recently tightened rules on banks’ foreign exchange positions. This forced banks to reduce dollar holdings locally while increasing activity in offshore markets.
This created a pricing gap between domestic and offshore dollar markets. Companies quickly moved to profit from this difference-buying dollars in India and selling them offshore. These arbitrage trades limited the rupee’s rise and led to volatile movements during the session.
Estimates suggest these repositioning flows ranged between $25 billion and $35 billion. The gap between offshore and onshore rates widened sharply, making such trades highly attractive.
At the same time, steady demand for dollars from importers-especially large firms covering near-term payments-added further pressure on the rupee.
Policy Signal, Not Shift
Economists said the central bank’s move appears to be more about signalling than changing policy direction. They noted that the aim is to show that authorities are closely watching markets and to discourage excessive speculation.
According to Economists , the broader outlook for the rupee remains unchanged. It continues to face pressure from global trade conditions and limited capital inflows, rather than short-term policy moves.
Meanwhile, Finance Minister Nirmala Sitharaman said India’s economic fundamentals remain strong. She stressed that the rupee’s fall should be seen in a global context, noting that several Asian currencies have weakened even more against the dollar.
Officials reiterated that the rupee is market-driven and influenced by global trends, capital flows and trade factors, while authorities continue to monitor the situation closely.
