"The old routine" is staged! The Reserve Bank of India "withdraws its defense", causing the rupee to hit a historic low against the US dollar, dragging down both stocks and bonds.

While traders indicated that the Reserve Bank of India is no longer defending the domestic currency exchange rate, the Indian rupee hit a historic low against the US dollar. On Monday, the Indian rupee against the US dollar fell by 0.4% to 89.78 Indian rupees to 1 US dollar, breaking the previous low of 89.49 set last Friday. Simultaneously, the decline of the Indian rupee has put pressure on the Indian stock market and bonds, causing the benchmark NSE Nifty 50 index to give up intraday gains and the five-year government bond yield to rise to the highest level since September. Sajal Gupta, the head of forex and commodities at Nuvama Institutional, pointed out that the sudden drop of the Indian rupee on November 21 was due to the Reserve Bank of India abandoning its firm intervention in the currency market, and what is happening now is "the same old story." He stated that after the key support level of 89.50 for the Indian rupee against the US dollar was breached, stop-loss orders were triggered, exacerbating the decline of the Indian rupee. Although the Reserve Bank of India has recently taken measures to intervene and curb the depreciation of the Indian rupee, the currency still faces pressure as India is one of the few major economies that have not yet signed a trade agreement with the United States. ANZ Banking Group stated that the delay in the trade agreement may reduce the urgency for the Reserve Bank of India to use foreign exchange reserves to defend the Indian rupee. Dhiraj Nim, a forex strategist at ANZ Banking, said, "This is related to the Reserve Bank of India's willingness to tolerate the depreciation of the Indian rupee, as the trade agreement is still distant - the previously expected deadline has passed, and recent news indicates that it may still take some time to reach an agreement." Despite official data showing that India's economy grew at its fastest pace in six quarters in the three months ending in September, the Indian rupee continues to weaken. The International Monetary Fund has lowered its economic growth forecast for India's next fiscal year to 6.2%, on the condition that the high tariffs imposed by the US remain unchanged. Since 2025, the Indian rupee has fallen by 4.5% against the US dollar, making it the worst-performing currency in Asia. As the Indian rupee approaches the threshold of 1 US dollar to 90 Indian rupees, traders are now focusing on the Reserve Bank of India's policy review meeting on December 5th to hear Governor Sanjay Malhotra's comments on the institution's tolerance for the continued weakness of the Indian rupee. In a recent interview, Sanjay Malhotra stated that the depreciation of the Indian rupee is a result of the inflation gap between India and developed countries. He added that a yearly depreciation of 3% to 3.5% for the Indian rupee is normal and emphasized that the focus of the Reserve Bank of India is still to curb excessive exchange rate volatility.