The Indian rupee, which initially opened positively, relinquished its gains and fell beyond the 90 per dollar mark following the Reserve Bank of India’s (RBI) decision to cut its key benchmark interest rate for the first time in six months on Friday.
Forex traders noted that the RBI’s rate cut could further weaken the rupee until there is a substantial return of foreign portfolio investors. The central bank’s action aims to enhance liquidity and support a “goldilocks” economy amid heightened US tariffs.
On the interbank foreign exchange market, the rupee opened at 89.85 against the US dollar and initially appreciated to 89.69, marking a 20-paise gain from its previous close. However, after the monetary policy announcement from the RBI, the rupee fell to 90.05 against the dollar, representing a 16-paise decline from the prior close of 89.89. Thus far in the year, the currency has depreciated nearly 5%, making it the worst performer in Asia.
Reserve Bank Governor Sanjay Malhotra emphasized that the central bank does not have a specific target for the rupee’s exchange rate, allowing it to find its own equilibrium in the forex market. “We don’t target any price levels or any bands. We allow the markets to determine the prices. We believe that markets, especially in the long run, are very efficient. It’s a very deep market,” he stated during a post-monetary policy press briefing.
Malhotra acknowledged that fluctuations in the market are common, stating that the RBI’s goal is to minimize any excessive volatility and that this focus will continue. In its recent bi-monthly monetary policy, the RBI announced USD/INR buy-sell swaps totaling USD 5 billion for three years this month.
When questioned about whether this measure aims to curb rupee depreciation, Malhotra clarified, “It is a liquidity measure. It is not to support the rupee.” He reiterated that the RBI does not target a specific exchange rate, allowing the rupee to “find its correct position.”
The governor also mentioned that India holds sufficient foreign exchange reserves and that the current account remains manageable, projecting strong capital flows in light of the economy’s robust fundamentals.
Meanwhile, the dollar index, which reflects the greenback’s value against a basket of six currencies, was trading slightly lower at 98.97, down by 0.02 percent. Brent crude oil, the global benchmark, decreased by 0.17 percent to $63.15 per barrel in futures trading.
On the domestic equity front, the Sensex gained 488.75 points to reach 85,754.07, while the Nifty index increased by 163.25 points to 26,197. On a net basis, foreign institutional investors sold equities worth ₹1,944.19 crore on Thursday, as reported by exchange data.
Published on December 5, 2025.
