Rupee Hits Record Lows, Falls for Fifth Straight Month in February Amid Foreign Outflows & Trade War Fears

The Indian rupee weakens further, driven by sustained foreign investor outflows, increased hedging, and concerns over U.S. tariffs.

March 1, 2025: Rupee Slides for Fifth Consecutive Month, Hits Record Low of 87.95 Against USD

The Indian rupee extended its losing streak for the fifth straight month, ending February at 87.4950 against the U.S. dollar, compared to 87.20 in the previous session. The domestic currency fell by 1% in February, reaching an all-time low of 87.95 during the month before stabilizing due to the Reserve Bank of India’s (RBI) intervention.

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The persistent weakness of the rupee is primarily attributed to foreign portfolio investor (FPI) outflows, increased hedging activity, and a global risk-off sentiment driven by uncertainty over U.S. tariffs and a potential trade war.

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Key Factors Behind Rupee’s Decline

📉 FPI Outflows:

• Foreign investors net sold $3.5 billion in Indian stocks in February, pushing the total outflows in 2025 to $12.5 billion.
• The Sensex and Nifty fell by 5.6% and 5.9%, respectively, in February, reflecting bearish investor sentiment.

📉 Hedging & Market Volatility:

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• Increased hedging demand in onshore and non-deliverable forward (NDF) markets pressured the rupee further.
• The RBI intervened to curb speculative bets, conducting a $10 billion dollar-rupee swap auction after a $5 billion swap in January.

📉 Trump’s Trade War Escalation:

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• U.S. President Donald Trump announced 25% tariffs on Canadian and Mexican imports, along with an additional 10% duty on Chinese goods, effective March 4.
• Protectionist measures have strengthened the U.S. dollar while weakening emerging market currencies like the rupee.

📉 Technical Resistance:

• HDFC Securities analyst Dilip Parmar predicts that the rupee will face strong resistance at 88 levels, with continued downside pressure from importers and foreign fund outflows.

📉 Asian Currency Weakness:

• Regional currencies remained volatile, while the U.S. dollar index declined, reflecting global uncertainty.

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RBI’s Intervention & Future Outlook

✅ RBI’s Response:

• The RBI’s periodic interventions prevented excessive speculation but couldn’t fully arrest the rupee’s slide.
• Further monetary measures may be needed to stabilize the currency.

✅ What Lies Ahead?

• Traders expect a stronger U.S. dollar due to peak global trade war concerns in Q2 2025, which could further weaken Asian and European currencies.
• Importers and FPIs may continue to exert pressure on the rupee, keeping it under bearish control.

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Conclusion

With global uncertainty, weak domestic equities, and persistent foreign outflows, the rupee’s trajectory remains under pressure. While the RBI’s intervention has slowed the fall, traders and investors remain cautious about further depreciation, especially as geopolitical and economic risks intensify.

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Tags:

#RupeeFall, #ForexMarket, #USDTINR, #StockMarket, #FPIOutflows, #RBIPolicy, #TrumpTariffs, #TradeWar, #CurrencyMarkets,