Rupee Hits Record Low of 88.75 Against US Dollar

On Tuesday, the Indian rupee plummeted to a record low of 88.75 against the US dollar, reflecting growing concerns over the US administration’s decision to sharply increase H-1B visa fees for new applicants, alongside continued outflows by foreign portfolio investors (FPIs). The domestic currency fell 44 paise from its previous close of 88.31 and touched an intraday low of 88.80. Analysts attribute the sharp depreciation to heightened uncertainty surrounding remittances, potential slowdown in service exports to the US, and broader trade tensions, which have created negative sentiment in the market.

The increase in H-1B visa fees was announced by US President Donald Trump, raising the application cost from $1,000 to $100,000 per applicant for new applications. Analysts warn that such a steep hike could slow remittance growth and affect service exports from India to the US. Anindya Banerjee, head of commodities and currency at Kotak Securities, noted that the USDINR is trading at record highs due to market concerns over potential changes in H-1B visa regulations and ongoing trade tensions, which continue to weigh heavily on investor sentiment.

The Reserve Bank of India (RBI) appears to be allowing market forces to determine prices more freely, with the weaker rupee serving as a buffer amid the trade war backdrop. The rupee has been on a steady depreciation path, marking its second consecutive day of decline and emerging as the weakest performer among Asian currencies. According to Dilip Parmar, research analyst at HDFC Securities, the downturn is largely driven by persistent bearish bets from traders, influenced by external uncertainties and ongoing outflows of foreign funds. Despite strong domestic high-frequency data, these external pressures have exerted downward pressure on the local currency.

Over the past three months, foreign investors have net-sold ₹61,522 crore worth of domestic equities due to uncertainties related to tariffs, further exacerbating downward pressure on the rupee.

Looking ahead, the rupee is expected to maintain a weaker bias but could see mild upward movement supported by firm US dollar sentiment and potential FPI inflows, according to Dipti Chitale, CEO of Mecklai Financial Services Pvt Ltd. Domestic factors will also influence the near-term trajectory of the rupee, including the anticipated 25 basis points reduction in the repo rate by the RBI in its upcoming monetary policy and the outcome of trade talks between India’s Commerce Minister Piyush Goyal and US Trade Representative Jamieson Greer.

In the absence of supportive global capital flows, the rupee is likely to remain under pressure, with RBI interventions providing only temporary stability. Analysts expect the USDINR spot rate to fluctuate within a range of 88.00 to 89.50 in the near term, reflecting ongoing market volatility.

In conclusion, the Indian rupee’s sharp decline is the result of a combination of domestic and international factors. These include policy changes in the US affecting H-1B visas, continued foreign capital outflows, trade-related uncertainties, and external macroeconomic pressures. While RBI interventions and potential domestic monetary easing may offer temporary relief, the currency is expected to remain vulnerable, with its near-term performance largely dictated by global investor sentiment, US dollar strength, and ongoing geopolitical and economic developments.