Rupee Hits ₹85.9 Against Dollar Amid Global Risk Aversion and FII Outflows

The Indian rupee slid to ₹85.9 against the U.S. dollar this week, marking one of its weakest levels in recent months. The currency’s depreciation comes against the backdrop of fresh U.S. tariff threats, which have reignited global trade tensions and triggered a flight to safety. Investors have sought refuge in the U.S. dollar, strengthening the greenback and putting emerging market currencies, including the rupee, under severe pressure. Additionally, sustained outflows from foreign institutional investors (FIIs) and surging U.S. Treasury yields have added to the downward spiral, affecting near-term sentiment across Indian equity and debt markets.

Amid this volatility, the Reserve Bank of India (RBI) has chosen to refrain from heavy-handed intervention, instead opting for a passive strategy to let market dynamics play out. By monitoring forward premium spreads and intervening selectively, the central bank appears to be managing rupee stability without draining foreign exchange reserves unnecessarily. However, the risk of imported inflation is now elevated, especially for sectors such as fuels, automobiles, and electronics, where a weaker rupee could directly inflate costs and compress corporate profit margins. This development comes at a critical juncture for Indian companies that are already facing pressure from global commodity price fluctuations.

Looking ahead, the rupee’s trajectory will likely hinge on the RBI’s monetary policy stance and the broader geopolitical climate. Market analysts are closely monitoring signals of foreign capital flows, particularly any signs of a reversal in FII activity or relief in bond markets. If U.S. yields soften or trade tensions de-escalate, the rupee could find a more stable footing. However, in the absence of such developments, continued pressure on the rupee could prompt the RBI to act more decisively. For investors and corporates alike, currency risk has re-emerged as a significant variable in portfolio and cost planning going into the next quarter.