The rupee tumbled to a fresh lifetime low on Friday, pressured by heavy foreign portfolio outflows, lingering uncertainty over a potential US-India trade deal, and a perceived scaling back of the Reserve Bank of India’s (RBI) defence of key levels.

The currency registered its steepest single-day fall in over three months, breaching the 89-per-dollar mark for the first time. It closed the session 93 paise weaker at 89.61 (provisional) against the US dollar, sliding past its all-time low of 88.8 recorded in late September and earlier this month.

Market observers now anticipate the rupee could test the psychologically significant 90 level if trade negotiations remain unresolved. The weakness comes despite India’s broader economic fundamentals staying resilient, with equity markets hovering near record highs.

Since late August, when steep US tariffs on Indian exports came into effect, the rupee has struggled to regain its footing. The tariffs have weighed on trade flows and widened India’s merchandise trade deficit, which hit a record high last month. Exports to the US fell 9 per cent year-on-year, underscoring the strain on bilateral trade.

Foreign investors have also turned risk-averse, withdrawing $16.5 billion from Indian equities so far this year. This makes India one of the worst-hit emerging markets in terms of portfolio outflows, further exacerbating pressure on the currency.

According to a Reuters report, traders anticipate the Reserve Bank of India, which had actively defended the 88.80 level in recent sessions, appeared to have scaled back its defence and instead likely stepped in near 89.50 on Friday.

“USD/INR broke decisively above 89, a level many importers and dealers believed the RBI would defend. Once this perception failed, aggressive short-covering kicked in across onshore and offshore markets, triggering stops and amplifying the upside move. In the near term, a combination of risk-off flows, a firmer US Dollar Index, and trade-deal uncertainty keeps the bias upward, potentially testing the 90 mark. For now, traders are watching a broad spot range of 88.7–90.3,” said Anindya Banerjee, head of research – currency, commodity and interest rate derivatives, Kotak Securities.

RBI governor Sanjay Malhotra on Thursday said that the central bank has not set any target for the rupee’s exchange rate against the dollar, stressing that market dynamics drive currency movements.

The rupee is among the weakest performers in major Asian currencies this year, down 4.5 per cent year-to-date.