rupee fall to 90 – Rupee breaches 90 mark, INR most depreciated but among least volatile currencies, says SBI report

India’s rupee slipped past the psychologically critical Rs 90 per US dollar level on Tuesday, marking one of its fastest declines in recent years. Yet, in a contrarian assessment, SBI Research has argued that the currency’s fall should not be mistaken for weakness, stressing that the rupee remains one of the most stable emerging-market currencies, with volatility far lower than global peers.

In its latest Ecowrap report, the country’s largest lender noted that while the rupee has depreciated roughly 5.5% since April 2025, this slide has been driven largely by external shocks, particularly the escalating trade dispute with the United States. The US government’s April announcement of steep import tariffs — a 50% slab specifically on Indian goods, the highest imposed on any Asian economy — has significantly pressured the Indian currency. China faces a 30% tariff, Vietnam 20%, Indonesia 19% and Japan 15%. With nearly $45 billion worth of Indian exports affected, the blow to India’s trade competitiveness has sharpened the rupee’s fall.

Despite this, SBI highlights a key fact often missed in market chatter: the rupee’s volatility remains exceptionally low. Since April, the currency has shown a coefficient of variation of just 1.7%, making it one of the least volatile major EM currencies, even though it is the most depreciated. “The narrative that the rupee is in free fall or out of control is factually incorrect,” the report states, arguing that the currency is sliding but not unstable.

The speed of depreciation, however, is notable. Data shows the rupee moved from Rs 85 to Rs 90 per dollar in just 349 days, marking the second-fastest  Rs 5 decline since the Taper Tantrum period. By contrast, earlier Rs 5 movements took far longer — 1815 days from 65 to 70, and nearly 800–900 days for subsequent ranges. SBI attributes the sharper pace to a combination of foreign portfolio outflows, uncertainty around the US–India trade deal, and the Reserve Bank of India’s deliberate strategy of avoiding the defence of any specific exchange-rate level.

The report also points to significant stress in the foreign exchange market. Between July and October, the merchant and forward markets recorded a combined excess dollar demand of over $100 billion, an unprecedented mismatch. The RBI intervened with an estimated $30 billion since June to manage volatility, though forex reserves still slipped from $703 billion to $688 billion during the period. Even so, the central bank has made it clear that its priority is financial stability, not currency targeting.

Supporting the rupee’s underlying fundamentals is valuation data. The Real Effective Exchange Rate (REER) index has stayed below 100 for three consecutive months, hitting 97.40 in September 2025, its lowest level in seven years — indicating that the rupee is undervalued rather than overextended. The Nominal Effective Exchange Rate (NEER) has also weakened to 84.6, reflecting broad-based depreciation relative to India’s trading partners.

Looking ahead, analysts say volatility may persist until negotiations on the US–India trade deal conclude, a process expected to stretch into early 2026. However, they emphasise that India’s macroeconomic foundations — strong reserves, stable inflation, steady growth and proactive regulatory oversight — continue to anchor confidence. The report stresses that labelling the rupee as “weak” ignores the broader context: global shocks, geopolitical tensions and tariff-driven imbalances are playing a far bigger role than domestic fragilities.

Additional factors, including higher dollar demand from importers, speculative positioning in offshore markets, and the triggering of multiple derivative barriers once the rupee crossed the 90 threshold, have amplified the pace of depreciation. Still, market participants note that this phase does not resemble past bouts of disorderly volatility. The RBI’s readiness to intervene when needed, coupled with its refusal to defend rigid currency levels, signals an approach aimed at maintaining stability without encouraging one-way bets.

With geopolitical uncertainty, elevated tariffs and tight dollar liquidity weighing on sentiment, the rupee may continue to test new levels. But as SBI emphasises, India’s domestic resilience — from banking system strength to healthy capital buffers — ensures that the current slide is orderly, not chaotic.