Indian Rupee hits record low of 85.07/USD as US Fed signals less rate cuts in 2025

New Delhi: The Indian Rupee fell to an all-time low of 85.07 (at the time of filing this report) against the U.S. dollar on Thursday as the greenback gained strength following the Federal Reserve's indication of fewer rate cuts in 2025.
The Fed's revised stance has dampened expectations for aggressive monetary easing, further pressuring emerging market currencies, including the Rupee.
Akshay Chinchalkar, Head of Research, Axis Securities told ANI, "The rupee fell to a record low, sinking beyond 85 for the first time ever, as Fed hawkishness that followed a 25 bps rate cut spooked investors. The Trump victory gave the dollar a bid on Nov 5 and Powell's statement yesterday confirmed that the Fed will re-focus on inflation reducing the odds of aggressive cuts in '25. This reduced expectation of further policy easing is likely to keep the rupee pressured along with other Asian and EM currencies".
The recent appreciation of the dollar has already been weighing on the Indian currency. The Reserve Bank of India (RBI) recently intervened by releasing forex reserves to manage the Rupee's decline. However, global dynamics have added to the challenges.
According to the recent RBI data, India's forex reserves have slumped in nine out of the past 10 weeks, hitting a multi-month low. The reserves had been falling ever since reserves touched an all-time high of USD 704.89 billion in September and now last week the forex stands at USD 654.857 billion.
The U.S. election results, which saw Donald Trump returning to the political stage, have shifted investor focus toward American markets. Global investors view the U.S. as offering more opportunities compared to emerging markets, leading to increased capital inflows into the U.S. and outflows from economies like India.
This capital shift has further strengthened the dollar while putting downward pressure on the Rupee. This adjustment in market expectations has made the Rupee, along with other Asian and emerging market currencies, vulnerable.
The weakening of the Rupee reflects the broader challenges faced by emerging markets amid a stronger dollar and shifting global monetary policy.