The Indian rupee has plummeted to a new record low, breaching the 90 per dollar mark on Wednesday, December 3, 2025. The rupee hit a low of ₹90.28 per dollar, marking its weakest level ever against the greenback. This decline extends a recent downward trend, making the Indian Rupee one of the worst-performing currencies in Asia this year.
The rupee's fall is attributed to several factors. A key element is the imbalance between the demand and supply of the dollar, further exacerbated by foreign fund outflows. Weak corporate earnings and delays in finalizing a trade deal between India and the United States have also contributed to the rupee's depreciation. This uncertainty surrounding the trade agreement has particularly dampened investor sentiment, leading to increased foreign outflows.
Moreover, sustained dollar buying by banks and persistent importer dollar demand continue to pressure the rupee. India's reliance on crude oil imports, fulfilling approximately 85% of its needs, adds to the strain as rising global oil prices inflate the import bill and increase dollar demand. A widening trade deficit, where imports outweigh exports, further compounds the currency's woes.
The Reserve Bank of India's (RBI) approach to managing the rupee's decline is also under scrutiny. While the RBI has historically intervened by selling dollars to stabilize the currency, it appears to have adopted a more flexible stance recently. This shift suggests a priority towards supporting economic growth rather than expending reserves to defend a specific exchange rate level. Some analysts believe the RBI is intervening only to curb extreme volatility, rather than attempting to reverse the overall trend. The IMF has also classified India's exchange-rate regime as a "crawl-like arrangement", which indicates that the currency is allowed to adjust gradually in line with inflation differentials.
Despite a robust GDP growth of 8.2% in the last quarter, which is the fastest in six quarters, it has done little to boost the currency. This is due to trade imbalances, foreign outflows and persistent dollar demand.
The weakening rupee presents both challenges and opportunities. For Indian companies with significant dollar-denominated debt, repayment becomes more expensive. Imports also become pricier, potentially leading to inflationary pressures. However, the decline offers a competitive edge to Indian exporters, as their goods become cheaper in international markets. For Non-Resident Indians (NRIs), the rupee's depreciation creates a favorable environment to send remittances home, as they get more rupees for every dollar.
Looking ahead, analysts anticipate the rupee to trade in the 88-92 range against the dollar. The near-term trajectory of the rupee will likely depend on the resolution of the India-US trade deal, foreign investment flows, and the RBI's monetary policy decisions. The Monetary Policy Committee is expected to make an interest rate decision on December 5, which could further influence the rupee's movement.
