The Indian rupee has plummeted to a new record low, reaching 90.56 against the US dollar on Friday, December 12, 2025. This decline is attributed to several factors, including the lack of progress on a trade deal between India and the United States, persistent foreign fund outflows, and strong dollar demand from importers.

The rupee's fall has been consistent, weakening to ₹90.55 against the US dollar, surpassing the previous low of ₹90.4675 recorded on December 11. Friday's slump saw the rupee open at 90.43 against the dollar, further declining to 90.56, a 24 paise fall from its previous close. On Thursday, the rupee had already plunged 54 paise to a low of 90.48 during intra-day trading, before closing at 90.49.

Chief Economic Advisor V Anantha Nageswaran's statement that the India-US trade deal is likely to be finalized by March 2026 has also contributed to the rupee's depreciation. Moreover, Mexico's announcement of potential tariffs of up to 50% on goods from Asian countries, including India, has further dampened investor sentiment.

The Reserve Bank of India (RBI) is likely intervening in the market to moderate the rupee's decline. However, the central bank seems to be focused on slowing the depreciation rather than defending a specific level. The RBI's intervention likely involves selling dollars through state-run banks.

The impact of the rupee's weakness is far-reaching. Steep US tariffs, as high as 50% on Indian goods, have hurt exports to the US, India's biggest market, reducing the appeal of Indian equities for foreign investors. Foreign investors have net sold $18 billion of Indian shares in 2025, making India one of the hardest-hit markets in terms of portfolio outflows.

Despite the current downturn, there is optimism that a breakthrough in US trade negotiations could reverse the rupee's trajectory. The US Trade Representative (USTR) Jamieson Greer has acknowledged receiving the "best" offers from India regarding the proposed trade agreement.

Analysts suggest that the rupee is currently undervalued. The currency's trade-weighted real effective exchange rate (REER) has fallen to 97.47 as of October, according to RBI data; a reading below 100 indicates undervaluation.

Market participants are closely watching the RBI's actions and the progress of trade talks between India and the US. The near-term outlook for the rupee remains uncertain, with the potential for further volatility depending on these key factors.