The rupee plummeted to record lows to the dollar on Thursday with the market thrust into turmoil by US President Donald Trump’s tariff threats even as foreign portfolio investors (FPIs) continue to remain in an exit mode.

On the eve of a likely interest rate cut by the Reserve Bank of India (RBI), the local currency slumped to an historic intra-day low of 87.59 to the dollar after opening at 87.54 and later settled at 87.58 against the last close of 87.47.

Trump’s election win in November has made the going rough for the rupee, with the likelihood of a fewer rate cuts by the US Federal Reserve in 2025 adding to its woes.

The rupee is hitting record lows frequently, generating the impression of the RBI under new governor Sanjay Malhotra loosening its grip over the currency.

At current levels, the Indian currency has slumped almost 2.26 per cent since the beginning of 2025.

Trump’s tariff threat and the retaliation by China has added another headwind. Experts pointed out such wars would only strengthen safe haven assets such as the US dollar and treasuries.

Moreover, the US has threatened BRICS to stop the de-dollarisation of trades, and India could face Trump’s ire after its recent pact with Indonesia to settle trade in local currencies. The slowdown in the economy has made matters worse as this has led to tepid corporate results and FPIs selling dollars.

Provisional data showed FPIs selling shares worth ₹3,550 crore on Thursday. So far in this calendar year, their sales stand at nearly $9.50 billion.

“We expect the rupee to trade with negative bias amid weak domestic markets and importer demand for dollars. Risk aversion in global markets amid ongoing uncertainty over US trade tariffs may further pressurise the rupee. However, any intervention by the RBI may support the rupee at lower levels,” said Anuj Choudhary research analyst at Mirae Asset Sharekhan.

“USD-INR spot price is expected to trade in a range of 87.30 to 87.90,” he added.

A Reuters poll of 36 foreign exchange analysts forecasts that the rupee will weaken to 87.63 against the dollar in six months – and 87.95 in a year’s time. In the interim, it is expected to hover around 87.23.

Some analysts have put out even more dire forecasts.

Anil Bhansali, head of treasury at Finrex, said the rupee is a vulnerable currency and a 5 per cent depreciation is on the cards.

While Malhotra will announce the decision of the monetary policy committee (MPC) on interest rates on Friday, the markets will watch out for his comments on the management of the rupee.

He is expected to reiterate that the central bank does not target a specific rate and that its principal aim is to curb volatility. However, observers do point out the RBI is now more amenable to the depreciation of the rupee than under Shaktikanta Das where the central bank maintained a tight leash over its movement.

BoE rate cut

The Bank of England halved its growth projection for the British economy this year as it cut its main interest rate Thursday for the third time in six months.

In a statement, the bank’s nine-member Monetary Policy Committee lowered its main interest rate by a quarter of a percentage point to 4.50 per cent, taking it to its lowest level since mid-2023.