The Indian Rupee has been under considerable pressure, prompting the Reserve Bank of India (RBI) to intervene in the foreign exchange market. The rupee's decline has been influenced by a combination of global and domestic factors, leading to increased volatility and concerns about the currency's stability.
The rupee's slide past ₹90 per U.S. dollar on December 3, 2025, triggered widespread discussions regarding market stability and a potential shift in the RBI's policy. The Indian rupee hit a record low on Monday, December 15, 2025, weakening to 90.6475 against the U.S. dollar. This surpassed the previous all-time low of 90.55 hit on December 12. On Tuesday, December 16, 2025, the rupee slipped further to 90.82 per US dollar.
Several factors have contributed to the rupee's depreciation. A major factor is the ongoing stalemate in U.S.-India trade negotiations. The imposition of steep U.S. tariffs, up to 50% on Indian goods, has hurt exports to the United States, which is India's biggest market. This has reduced the appeal of local equities to foreign investors. The uncertainty surrounding the trade deal has made traders wary of near-term inflows.
Another significant factor is capital outflows. Foreign portfolio investors (FPIs) have withdrawn substantial amounts from Indian equity markets. In 2025, FPI outflows have been the largest in two decades. Furthermore, FPIs have also reduced their holdings in local debt. These outflows exacerbate the rupee's decline as investors sell rupees to buy dollars.
Surging gold and silver imports have also added to the pressure. Domestic investors seeking safe-haven assets amid financial uncertainty have driven massive bullion imports. To purchase gold and silver, domestic players sold rupees to buy dollars, further pressuring the exchange market and worsening the trade balance.
In response to the rupee's weakness, the RBI has intervened through dollar sales and short forward positions to manage volatility. On Monday, November 24, 2025, the RBI took decisive action to ease the downward pressure on the rupee, which had intensified after the currency fell past a key level on Friday. The central bank likely sold dollars on the order-matching platform and in the non-deliverable forward market, boosting market sentiment. However, the RBI appears to be moderating its interventions, possibly prioritizing economic growth over aggressive rupee defense.
The rupee's depreciation has implications for the broader economy. A weaker rupee can lead to imported inflation, potentially forcing the central bank to be cautious about easing monetary policy. While exporters may gain a competitive advantage, companies with dollar-denominated debt could face higher repayment costs.
Analysts expect the rupee to remain under pressure in the near term, with some projecting it could touch 91 per dollar before the end of December. The currency's performance also exposes India's reliance on foreign capital to fund its current account gap and corporate borrowing, leaving markets vulnerable to global interest-rate shifts and trade headlines.
The situation necessitates a balanced approach from the RBI and the government to limit disruptive volatility while avoiding measures that harm economic recovery. The coming months will be crucial in determining whether the RBI's strategy can stabilize macroeconomic pressures without triggering financial instability.
