The Indian rupee experienced a decline on Friday, settling down by 5 paise at 89.94 (provisional) against the US dollar. This drop followed the Reserve Bank of India’s (RBI) decision to cut its key benchmark interest rate for the first time in six months.
Forex traders noted that while the RBI’s rate cut may pressure the rupee, its plan to purchase government bonds worth up to ₹1 lakh crore through open market operations (OMO), along with a $5 billion buy-sell swap, is expected to provide support to the local currency.
In the interbank foreign exchange market, the rupee initially opened at 89.85 and strengthened to 89.69 during morning trading, reflecting a 20-paise gain from its previous closing value. However, following the RBI’s monetary policy announcement, the rupee reversed course, dropping to 90.06 against the dollar—a decline of 16 paise from the previous close of 89.89. For the year, the rupee has depreciated almost 5 percent against the dollar, making it the worst-performing currency in Asia.
Ultimately, the rupee closed lower at 89.94 (provisional). Sachin Bajaj, Executive Vice President and Chief Investment Officer at Axis Max Life Insurance, commented, “Beyond the rate cut, the RBI’s decision to purchase government bonds worth up to ₹1 lakh crore through OMO, combined with a $5 billion buy-sell swap, marks a decisive effort to restore durable liquidity and stabilize currency markets after the rupee’s sharp depreciation.”
In its recent monetary policy, the RBI implemented its first rate cut in six months and took measures to enhance liquidity amidst rising US tariffs, supporting what it describes as a “goldilocks” economy. Reserve Bank Governor Sanjay Malhotra stated that the central bank does not target any specific band for the rupee in the foreign exchange market, allowing the currency to find its correct level naturally.
He remarked, “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.” Malhotra acknowledged that market fluctuations are ongoing and emphasized the RBI’s commitment to mitigating excessive volatility.
Regarding the $5 billion buy-sell swaps, Malhotra clarified, “It is a liquidity measure. It is not to support the rupee.” He also reassured that India possesses sufficient foreign exchange reserves and a manageable current account, asserting that strong capital flows should continue due to the country’s positive economic fundamentals.
Meanwhile, the dollar index, reflecting the greenback’s strength against a basket of six currencies, traded 0.03 percent lower at 98.96. Brent crude, the global oil benchmark, edged up 0.02 percent to $63.27 per barrel in futures trading.
On the domestic equity front, the Sensex rose by 447.05 points to close at 85,712.37, while the Nifty gained 152.70 points to reach 26,186.45. According to exchange data, foreign institutional investors sold equities worth ₹1,944.19 crore on a net basis on Thursday.
Published on December 5, 2025.
