Rupee Slips to Record Low, Dips Below 85 Against Dollar as US Fed Curbs Rate Cut Expectations for 2025

INR vs USD: Rupee’s drop to 85 from 84 has taken place in about two months, while the decline to 84 from 83 took nearly 14 months. It took the currency 10 months to decline to 83 from 82

The Indian rupee fell to a record low, slipping past 85 to the US dollar for the first time on Thursday, after the Federal Reserve signalled fewer rate cuts next year. The rupee fell 12 paise to hit a low of 85.0675 against the US dollar.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.01% at 108.03, near Thursday’s two-year top of 108.27.

The rupee’s drop to 85 from 84 has taken place in about two months, while the decline to 84 from 83 took nearly 14 months. It took the currency 10 months to decline to 83 from 82, Reuters reported.

Other Asian currencies also depreciated as the Korean won, the Malaysian ringgit, and the Indonesian rupiah were down 0.8%-1.2% on the day, after the Fed dot plot indicated two rate cuts next year, half of what was signalled in September.

“US Fed’s revision of key economic projections, coupled with a cautiously optimistic Fed outlook, led the dollar index to surge to 108.27 and US 10-year bond yields to 4.52%, pressuring emerging market currencies, including the Indian rupee. Despite the challenges, the rupee may find support through Reserve Bank of India interventions and inflows from IPO fundraising activities. These factors are expected to stabilize the rupee near the critical 85.20 mark,” said Amit Pabari, MD, CR Forex Advisors.

The hawkish tilt from the US Federal Reserve also spooked equity markets globally. Wall Street’s all three major indices declined up to 3% on Wednesday.

On the domestic front, the Indian stock market benchmark indices, Sensex and Nifty 50, crashed over a percent following the Fed’s hawkish outlook.

The Sensex plunged 826.40 points, or 1.03%, to trade at 79,355.80, while the Nifty 50 was down 211.80 points, or 0.88%, at 23,987.05.

Rupee Outlook
In the near term, Pabari expects the rupee to trade within the range of 84.70–85.20, with headwinds outweighing tailwinds.

“As markets absorb the Fed’s cautious yet hawkish tone, global and domestic factors will continue to dictate the rupee’s trajectory in the coming months. Today’s focus will be on the Bank of England’s monetary policy, with expectations of a neutral stance, potentially cooling some of the strength in the dollar,” Pabari said.

According to Riya Singh – Research Analyst, Commodities and Currency, Emkay Global, the rupee’s trajectory remains under strain.

“While RBI interventions may temper volatility, structural challenges, including twin deficits and weak export performance, persist. Sustained dollar strength and rising global interest rates add to the rupee’s vulnerability. USD/INR pair broke off the resistance level of 85.00, with potential depreciation towards 85.18 – 85.35. Conversely, a breach below 84.78 could expose support levels near 84.50,” Singh said.