The rupee slipped through the psychological and technical barrier of 90 per dollar on Wednesday, pressured by steady capital outflows, persistent uncertainty over trade negotiations with the US and firm dollar demand through the past week, amid what traders described as limited market intervention by the Reserve Bank of India (RBI).
With a fall of more than 5 per cent against the dollar so far in 2025, the Indian currency is the worst performer in Asia this year. It has taken just 773 trading sessions for the rupee to tumble from 80 per dollar to 90.
On Wednesday, the currency dropped to an intraday low of 90.30 before central bank dollar sales trimmed losses. It closed at 90.20, compared with 89.88 in the previous session.
The rupee has continued to weaken after breaching the RBI’s earlier defence near 88.80.
Market participants said persistent dollar buying on any dip suggested that any recovery in the currency was likely to remain shallow and short-lived, with the RBI expected to focus on smoothing volatility rather than halting the trend. While a sharp fall from current levels appears unlikely, further depreciation into next year remains the base case for many analysts.
The International Monetary Fund (IMF) recently reclassified India’s exchange rate regime as a “crawl-like arrangement” from a “stabilised arrangement”, reflecting more gradual adjustments in line with inflation differentials.
Asked about the weakening currency on the sidelines of an event in New Delhi, Chief Economic Advisor Anantha Nageswaran said: “It will come back next year. Right now, it’s not hurting our exports or inflation. I am not losing my sleep over it. If it has to depreciate, now probably is the right time.”
Following the latest slide, FX strategists at Barclays revised their forecast for the rupee to 94 per dollar by 2026, from 92 previously. “As long as the currency continues on its ‘crawl’, moving roughly along the path implied by forwards, it should not prompt major resistance from the RBI,” the bank said in a note. RBI Governor Malhotra “does not appear to be particularly concerned”, it added, arguing that the depreciation was broadly in line with inflation gaps between India and advanced economies.
Should the fall accelerate, the central bank still has “plenty of ammunition” in the form of its FX reserves, which stood at $688 billion as of November 21, covering roughly 11 months of imports, according to the note.
“The rupee breached a psychologically important level of 90 today. The slide was one of the quickest in recent times after the heady days of the Taper Tantrum,” said Soumya Kanti Ghosh, group chief economic advisor at State Bank of India. “The decline is being driven to the edge by the trifecta of limbo in the US-India trade deal, FPI outflows (chiefly equities after two years of robust inflows) and the RBI’s clear stance of distancing itself from an ‘interventionist regime’.”
As of October 2025, the rupee’s real effective exchange rate stood at 97.47, according to the RBI. Before the latest depreciation, the REER had risen from 103.66 in January 2024 to a peak of 108.14 in November 2024. “The latest REER data indicates the rupee is undervalued for a third straight month, reflecting a softer currency and lower inflation,” said Ghosh.
Not just against the American dollar, the rupee has sharply weakened against other major currencies, too, this year. Against the euro it is down over 12 per cent this year, while versus the Chinese renminbi, it is down nearly 8 per cent.
Traders said each leg down in the rupee had triggered fresh dollar buying, particularly from importers, while exporters were reluctant to sell holdings. With capital inflows still subdued, this demand-supply mismatch has kept the currency under pressure.
“The recent intervention bias suggests the currency will be allowed to find its equilibrium, to better reflect underlying macro shifts. The need to maintain the currency at competitive levels stems from the broader focus on manufacturing, unfavourable tariff differentials at this juncture and a subdued portfolio flows outlook,” said Radhika Rao, executive director and senior economist at DBS Bank.
Attention is now firmly on the US trade deal, viewed as a key catalyst for stabilising the battered currency. “The retracement will only happen after the trade deal is signed; otherwise, the pressure will continue,” said Anshul Chandak, head of treasury at RBL Bank. “We expect the rupee to appreciate to 89–89.50 per dollar by the end of the financial year.”
With the monetary policy committee beginning its December meeting on Wednesday, investors are watching to see whether the rupee’s sharp slide will colour the MPC’s rate discussions. With rates benign and growth robust, the decision is expected to be finely balanced. Tracking ₹ trajectory
After remaining broadly stable over the past two years, the rupee has depreciated by about 5.1 per cent so far in 2025, from 85.61 per dollar at the end of 2024 to 90.20. It is the worst-performing Asian currency this year.
While the current decline is milder than crisis years such as 2008, 2011, and 2013, the fall from 80 to 90 per dollar took 773 trading days, the fastest pace ever recorded. The rupee’s slide in 2025 is its steepest since 2022, when it dropped more than 10 per cent following Russia’s invasion of Ukraine. In 2013, the Indian unit lost 11 per cent amid the US Fed’s taper tantrum. Aperiod that saw India in the “fragile five” economies, and the country’s foreign exchange reserves plummeted to around $275 billion by September.
In contrast, the central bank has now built foreign exchange reserves close to $700 billion, which provide cover for 11 months of exports.
At the same time, the net short position of the forward has again started to swell, which was at $59 billion by the end of September. It will put pressure on the exchange rate as it matures.
Amid a delayed trade deal with the US, India’s merchandise trade deficit widened materially in 2025, frequently exceeding $22–27 billion and surging to $41.7 billion in October, which added to the strain.
