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

The Indian rupee fell past the critical psychological level of 90 rupees per US dollar on Tuesday, marking one of its fastest declines in recent years. However, in a contradictory assessment, SBI Research claimed 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 much lower volatility than its global counterparts.

In its latest Ecowrap report, the country’s largest bank noted that while the rupee has depreciated by about 5.5% since April 2025, this decline was largely driven by external shocks, especially the escalating trade dispute with the United States. The US government’s announcement in April of heavy import tariffs – 50% specifically on Indian goods, the highest of any Asian economy – put significant pressure on the Indian currency. China faces a 30% tariff, Vietnam 20%, Indonesia 19%, and Japan 15%. With Indian exports worth about $45 billion affected, the hit to India’s trade competitiveness has exacerbated the rupee’s decline.

Despite this, the Central Bank of Sudan highlights a key fact that is often overlooked in market chatter: rupee 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 emerging market currencies, even though it is the most devalued. “The narrative that the rupee is in free fall or out of control is factually incorrect,” the report said, arguing that the currency is slipping but not unstable.

However, the speed of consumption is noticeable. Data show that the rupee went from Rs 85 to Rs 90 per dollar in just 349 days, marking the second-fastest Rs 5 depreciation since the tantrum period. In contrast, the pre-Rupee 5 movements took much longer – 1815 days from 65-70, and approximately 800-900 days for the later ranges. The RBI attributes this sharper pace to a combination of foreign portfolio outflows, uncertainty surrounding the US-India trade deal, and the RBI’s deliberate strategy of avoiding defending any specific exchange rate level.

The report also points to significant pressures in the foreign exchange market. Between July and October, commercial and futures markets recorded excess dollar demand of more than $100 billion, an unprecedented mismatch. The Reserve Bank of India has intervened an estimated $30 billion since June to manage volatility, although foreign exchange reserves still fell from $703 billion to $688 billion during the period. However, the central bank made 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 remained below 100 for three consecutive months, reaching 97.40 in September 2025, its lowest level in seven years – indicating that the rupee is undervalued rather than overvalued. The nominal effective exchange rate also fell to 84.6, reflecting widespread devaluation of the currency compared to India’s trading partners.

Looking ahead, analysts say volatility may continue until the conclusion of negotiations on a US-India trade deal, a process expected to extend into early 2026. However, they stress that India’s macroeconomic fundamentals – strong reserves, stable inflation, steady growth and proactive regulatory oversight – continue to underpin confidence. The report stresses that describing the rupee as “weak” ignores the broader context: global shocks, geopolitical tensions and tariff-induced imbalances play a much larger role than domestic fragility.

Additional factors, including higher demand for the dollar by importers, speculation in foreign markets, and the triggering of multiple financial derivative barriers once the rupee crossed the 90 mark, amplified the pace of depreciation. However, market participants note that this phase is unlike previous bouts of uncontrolled volatility. The Reserve Bank of India’s willingness to intervene when needed, coupled with its refusal to defend rigid currency levels, suggests an approach aimed at maintaining stability without encouraging one-way bets.

With geopolitical uncertainty, higher tariffs and lack of dollar liquidity weighing on sentiment, the rupee may continue to test new levels. But as the SBI stresses, India’s domestic resilience – from a strong banking system to healthy capital buffers – ensures that the current slide is orderly, not chaotic.